Anatomy of a compromise; Making social security secure again

The National Commission on Social Security Reform has snatched victory from the jaws of defeat. For 11 months, it appeared the commission's Democrats and Republicans wouldn't be able to agree on a single package of repairs for social security. But a final-hour minuet of negotiations has produced a report that suggests some far-reaching changes in the troubled retirement system - changes many Washington pundits said no one would have the courage to propose.

President Reagan, House Speaker Thomas P. (Tip) O'Neill Jr. (D) of Massachusetts, and other key congressional leaders all support the package. If the work is approved by Congress, the commission will have prevented a political debate that could have been as bitter and scarring as any Washington wrangle of the past two years.

''I see nothing but cooperation all the way around,'' saidSen. Robert Dole, Senate Finance Committee chairman and a commission member, Jan. 16 on NBC's Meet The Press. But Mr. Dole cautioned there could still be a fight in Congress over the details of the social security repair package.

The 15-member, bipartisan commission, created by President Reagan in December 1981, agreed last year that social security needs an infusion of $150 to $200 billion by 1990. Democrats on the panel favored raising most of the money through tax increases; Republicans were more partial to changes on the benefit side of the system. Chairman Alan Greenspan's problem was finding a mix of tax and benefit changes both sides could agree to.

Late on the snow-spattered evening of Jan. 15, in the elegant confines of Blair House, the commission finally approved by 12-3 vote a package that would raise $169 billion by 1990.

Under the proposed changes, current beneficiaries wouldn't lose a penny of their monthly checks - although their next cost-of-living raise will be postponed. But the package would subtly make some significant changes in the system.

For the first time, social security would be allowed (albeit indirectly) to dip into the Treasury's general tax revenues for funds. The package would roll forward social security tax increases now scheduled for 1985 and 1990 - and at the same time would allow workers an income tax credit to offset the first hike. Since the Treasury would lose tax revenue, this is a roundabout way of supplementing social security's trust funds with general revenues.

Liberals have supported such a move for years, while conservatives have generally opposed it. ''It's not the type of thing I'd like'' under ideal circumstances, admitted Mr. Greenspan Sunday on ABC.

Tax increases, as a whole, would raise $40 billion in new cash by 1990.

Social security would be tilted a bit more in favor of poorer retirees. The commission proposes that single retirees whose annual income is more than $20, 000 ($25,000 for couples) pay income tax on half their benefits. This action is supported by groups ranging from Ralph Nader's Public Citizen to the more fiscally conservative Committee for Economic Development. Such a benefit tax would raise $30 billion over the next seven years, estimates the commission.

But congressional sources, in the past, have said taxing benefits is ''an idea whose time has not come,'' because of the uproar it would likely cause among politically powerful middle- and upper-income retirees. The strong majority vote of the committee may give its bipartisan supporters enough momentum to override congressional footdragging.

Another big chunk of revenue, $40 billion, would come from postponing this year's cost-of-living increase from July until January. COLA raises thereafter would begin on the first of the year, and still be determined by the increase in the consumer price index.

The balance of the package's $169 billion would be raised by bringing new federal employees and all non-profit employees into the system, raising social security taxes for the self-employed, and forcing the Treasury to pay for certain social security benefits granted members of the military.

The provisions in the commission's package would also raise more than two-thirds of the money needed to shore up the system over the next 75 years. Republicans and Democrats agreed to differ on where the last third of the money would come from - with Democrats favoring another tax increase after 2010, and the GOP members suggesting a gradual rise in the retirement age.

This compromise package proved acceptable to all but the most conservative members of the commission: Sen. William L. Armstrong (R) of Colorado, Rep. Bill Archer (R) of Texas, and former Rep. Joe Waggoner of Louisiana.President Reagan, whose aides were heavily involved in the final negotiations, said the package ''suits me.'' House Speaker O'Neill also affirmed his support.

By producing a single package, the commission may well have headed off a debate that would have deadlocked Congress. ''If this had gone to a legislative battle, it's unclear what would have happened,'' chairman Greenspan said Sunday. Debate could have stalled, he said, and Congress might have had to just fund the troubled system through general revenues, beginning next summer. Greenspan felt such a scenario would have been ''a terrible blow to the budget.''

The scene now switches to the House Ways and Means Committee, where chairman Rep. Dan Rostenkowski (D) of Illinois will begin hearings on social security in a month.

''We're literally going to start with the commission's report,'' says John Sherman, an aide to Mr. Rostenkowski, ''since we're going to start with two days of testimony from members of the commission itself.''

While Rostenkowski won't necessarily accept the commission's work in its entirety, he feels ''it's a strong starting point,'' says Mr. Sherman. ''We got a lot more out of the commission than we expected.''

The only group so far to express overt displeasure with the report are Sen. Armstrong, Rep. Archer, and other conservatives, who feel the reforms include too many tax hikes. It ''falls far short'' of what's needed, said Armstrong after the panel's final meeting.

Armstrong, as chairman of the Senate social security subcommittee, is likely to have a large say in any social security package to pass Congress. And conservative House Republicans, for their part, have long experience in delaying action on measures they don't like.