Social Security Options

Report Outline
Impending Funding Crunch
Long-Term Funding Problems
Future Political Outlook
Special Focus

Impending Funding Crunch

Legislative Priority in Upcoming Session

When the 98th congress convenes in January, one of the first items on its agenda will be reform of the nation's troubled Social Security system. The largest of the system's three trust funds, Old Age and Survivors Insurance (OASI), already is running at a deficit, and by sometime in 1984 the system as a whole is expected to go into the red. While nearly everyone agrees that something must be done to shore up the Social Security trust funds, there are sharp partisan differences on how to approach the problem and it is not clear how quickly they can be resolved.

In principle, Congress should be able to reach a compromise between revenue increases, which Democrats tend to favor, and benefit cuts, the Republican preference. But any kind of tax increase can be politically explosive, especially at a time of economic recession, and any reductions in benefits could antagonize Social Security beneficiaries—roughly one-seventh of the U.S. population.

In 1981 President Reagan recommended sweeping cuts in Social Security benefits, including elimination of the minimum monthly payment for low-income beneficiaries. But the public and congressional outcry was so great that the administration beat a hasty retreat. Instead, the president announced that he was setting up a 15-member bipartisan commission to find a permanent solution to Social Security's financial woes. Chaired by Alan Greenspan, the head of the Council of Economic Advisers under President Ford, the commission includes five members appointed by the president, five appointed by Senate Majority Leader Howard H. Baker Jr., R-Tenn., and five by House Speaker Thomas P. O'Neill Jr., D-Mass.