SOCIAL INSECURITY

YOU KNOW A GOVERNMENT program is in trouble when it's less credible than a flying saucer. At a Senate committee hearing last month to reconfirm Shirley Chater as commissioner of the Social Security Administration, Republican Alan Simpson of Wyoming confronted Chater with a poll showing that more people under the age of 35 believe in UFOs than in the prospect that Social Security will pay them benefits upon retirement. Whatever the merits of their judgment on extraterrestrials, on Social Security the new workers have it exactly right. Given enough time, reality bites.

Long before they get their first serious wrinkle--in 20 years, more or less, when people now in their mid-40s begin to retire-the system will be lurching into its final crisis. For government to pay pensions to the advancing tide of baby boomers will almost certainly require stunning benefit reductions or huge tax increases. More likely both. After years of fiscal and political fecklessness, an explosive conclusion.

And years before it collapses altogether--starting this year--the Social Security system will begin to be a bad deal for increasing numbers of those who do collect benefits. Until now, just about all recipients have got back the sum of their lifetime contributions, plus interest, with just a few years of retirement checks. Everything after that was gravy. But some 1995 retirees will be the system's first losers--meaning the benefits they stand to collect will, on average, fall short of what they paid in Social Security taxes, plus the interest those taxes might have earned if the money had been invested in, say, a bank savings account.

The unlucky pioneers are higher-income men (they pay more during their working years) who have never married (so they won't get the additional 50% in spousal payments that can go to married male retirees). A small category, but prophetic. They will be the first to run up against the personal deficit in store for many younger workers, who pay much higher rates of Social Security tax than their parents' generation. If the system let earlier retirees make out like bandits, for everyone who follows it's hands up.

Or at least that's what will happen if Social Security endures in something like its present form. Should it? Though it's anathema to most politicians to say so, among the scholars and policy analysts who study the budget charts and chew their nails in suspense as the baby boomers inch toward later life, the verdict is just about unanimous: as Social Security nears its 60th birthday, it is ripe for retirement.

Most Americans, they argue cogently, would be better assured of a financially independent old age by a two-tier system. Part of it would guarantee a safety net to those who really need it. A second part, funded through mandatory private savings, would pay all Americans retirement benefits pegged to their actual contributions. But if the change is to take place, it would be better to have it before the immense claims of retiring baby boomers send the system into shock-and create a huge bloc of pensioners fiercely invested in the status quo. Also before a resentful younger generation, faced with the prospect of giant tax hikes, starts practicing reform with a sledgehammer.