Social Security: A Debt-Threatened Dream

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stamps and Aid to Families with Dependent Children, which the poor need more and which have already been slashed severely. Says Elizabeth Kutza, associate professor at the University of Chicago's School of Social Service Administration: "There is now open competition among welfare groups. There is fear that the elderly will capture all the welfare resources, at the expense of other disadvantaged people" who have no powerful lobby to speak for them. That competition is difficult to mediate, she adds, because "most people now regard Social Security as a guarantee of middle-class income levels. The elderly lobby groups represent a white-collar view of the world."

Slow the Growth of Benefits. Despite much demagoguery, no one is talking about snipping so much as a penny off present benefits; anyone now receiving an average pension check of $379 a month can count on continuing to collect at least that much, unless the trust funds do indeed run dry. But it seems imperative to keep future inflation from pushing up benefits as rapidly as it did from 1975 to 1981. Besides saving money for the trust funds and helping to trim the overall budget deficit in the short run, a limit on future increases could also help build up reserves to soften the 21st century's demographic crunch. Any increase decreed now will almost certainly be frozen into the benefit rates paid to future retirees; the cumulative cost over the decades is gigantic.

Debates over what to do about Social Security in forthcoming federal budgets initially focused on quick, temporary ways to conserve cash. Among the suggestions: a one-year freeze on cost of living adjustments (COLAS) in Social Security pension benefits and many other federal programs, an idea first put forward in February by Democratic Senator Ernest Rollings of South Carolina, which would save $11.3 billion; and a three-month delay in the COLA that might be paid in July 1983 (estimated savings: $3.3 billion at an 8% inflation rate), a plan advanced by Senate Republican Leader Howard Baker in an unsuccessful attempt to keep budget-compromise negotiations between Reagan and congressional leaders from breaking down at the end of April.

To have more than a brief impact on the deficit, any such plan would have to be combined with a cap on future COLAS. One proposal advocated vigorously by Harvard's Martin Feldstein, a member of TIME's Board of Economists, would be to limit future increases to "inflation less 2%"; that is, if the CPI rose 8% in a given year, Social Security benefits would go up only 6%. The virtue of this plan is that it would be similar to the treatment of COLAS in private industry: workers whose wages are indexed to inflation generally get raises equal to only a portion of the CPI increase.

The most popular idea among academic experts is to index benefits either to the rise in prices or to the increase in average wages throughout the economy—whichever is less. That would keep benefits in inflationary periods from racing far ahead of tax collections, which are keyed to the rise in wages. Advocates defend the plan on grounds of equity too: Why should the elderly be afforded fuller protection against the ravages of inflation than the young and middle-aged workers whose taxes pay for their pensions?

Stanford Economist Rita Ricardo-Campbell emphasizes the most damning Social