Social Security: A Debt-Threatened Dream

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inevitable. It could be changed by a renewed surge in birth rates, for example, or a continued rise in immigration by Hispanics and Asians, most of whom are young and who will work and pay Social Security taxes for many years before they collect benefits.

But it would be most imprudent to stall on fundamental reform of the Social Security system and trust to these uncertainties. As Boskin puts it, if pessimistic demographic predictions corne true and "we wait until early next century to do something about this, the Social Security deficit could be well over a trillion dollars." Given the moral imperative of providing people who are now working with ample time to adjust their retirement plans to changes in Social Security, the Administration and Congresss should combine action to ease the immediate cash squeeze and budget deficit with long-range reforms, legislated now to take effect gradually over the decades. Otherwise, the prosperous '90s might be no more than an interlude between crises.

There is no dearth of plans for both short-and long-range reform. Experts have exhaustively debated dozens of proposals; it seems most unlikely that the Greenspan commission can come up with any new ones. What has been lacking, and is still lacking, is the political will to overcome the furious opposition that a proposed change in Social Security inevitably arouses.

The one solution that gets very little discussion is any raising of Social Security payroll taxes still further, on top of the huge future increases already written into law. Though some Social Security experts believe that a relatively small additional increase could both stop the immediate cash drain and build adequate reserves to handle the 21st century demographic dilemma', the idea makes politicians shudder. As a matter of equity and politics, there is little appeal in further increasing a tax whose burden falls most heavily on low-income workers, while the well off escape Social Security taxes on a portion of their earnings and are having their income taxes cut. There is justified concern too that another payroll-tax boost could further delay the economic recovery that would help Social Security more than anything.

That leaves two general classes of short-term solutions:

Tap General Revenues. Liberals, and others opposed to any reduction in benefits, argue for using income tax and other revenues to make any payments that cannot be financed by the payroll tax. Former Social Security Commissioner Robert M. Ball contends that the system could get through the '80s with relatively small "borrowings," which could be repaid, with interest, out of the reserves that the pension fund will again begin to accumulate in the '90s.

The argument against general-revenue financing is stated succinctly by Social Security Commissioner John Svahn: " What general revenues?" In an era of budget deficits that could all too easily approach $200 billion a year, the Government simply has no funds to spare. Diverting money to Social Security would force the Government to borrow even more from the financial markets than it is already doing to finance defense and general social spending, thus helping to keep interest rates high.

Alternatively, giving Social Security an open-ended call on general revenues might prompt further cutbacks in other programs, such as food