The Budget's Sacred Cow

With outlays estimated at $217 billion this fiscal year, Social Security programs represent the largest expenditure in the federal budget after national defense. But when congressional leaders and Administration officials huddled last week to hunt for $23 billion in savings, Social Security was clearly untouchable. "Everything is on the table," President Reagan told the nation before the meeting, "with the exception of Social Security."

Why should one program get a free pass? Because, with its 38 million beneficiaries, Social Security is one of the Federal Government's most popular and effective programs. It has vastly improved the lives of America's elderly: a 65-year-old worker who retires this year could receive the top Social Security payment of $789 a month, or 53% of the average national wage. Moreover, retirees regard those monthly checks as their due, a return on their payroll-tax contributions to the Social Security trust fund over the years. They see Social Security as an insurance rather than a welfare program, and this attitude has made benefits virtually unassailable by cost cutters. To ensure that the program remains sacrosanct, it is watched over by an enormous lobby: some 110 organizations that claim to represent approximately 50 million members. The forces behind Social Security are so strong that when Ronald Reagan proposed cutting Social Security benefits in 1981, the Republican- controlled Senate slapped him down by a vote of 96 to 0.

Yet some critics have had the temerity to point out that most retirees receive benefits much greater than the amount that they and their employers paid in. Moreover, huge chunks of Social Security go to retirees who already have considerable assets. Meanwhile, half the 125 million workers who help finance those benefits through the current 7.15% payroll tax will earn less than $15,000.

Congress partially redressed some of the inequities in the system in 1983 by imposing a tax on up to half the Social Security benefits of couples with retirement incomes over $32,000 and of individuals with incomes over $25,000. That tax will bring in about $4 billion next year, and some economists have proposed extending it to cover all Social Security benefits that go to well- to-do families.

The budget summiteers could also save an estimated $24 billion in the next three years by freezing the annual cost-of-living adjustments for Social Security payments. That is not likely: just last year, when the Consumer Price Index failed to rise by 3%, the amount necessary to trigger a cost-of-living increase, Congress went ahead and voted an $8.6 billion hike anyway.

In case the budget cutters forgot about the power of elderly voters, Congress sent them a reminder last week: the Senate passed a bill providing for catastrophic health insurance, a worthwhile law that will nonetheless dramatically expand Medicare payments for serious illness. Although financed by Medicare premiums at the outset, the program will cost $1.4 billion this year, $4.5 billion in 1990 and untold amounts in the future.