Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, November 5, 1994                   TAG: 9411080015
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-1   EDITION: METRO 
SOURCE: Knight-Ridder Newspapers
DATELINE: WASHINGTON                                LENGTH: Medium

YOU MAY NOT LIKE WHAT THE EXPERTS SAY ABOUT SOCIAL SECURITY

With Social Security turning into a hot issue in the home stretch of the congressional elections, candidates of every political stripe are signing pledges and swearing oaths not to cut retirement benefits.

But experts familiar with the retirement program say it's a virtual certainty that benefits will have to be cut or taxes raised in the next few years to ensure Social Security's long-term financial stability.

``The trustees of Social Security have clearly indicated that all the various parts of the system are out of balance, and action must be taken to restore that balance,'' said economist Eugene Steuerle of the Urban Institute. ``Most of the people on the campaign trail are well aware of this.''

The latest projections show that Social Security faces a cash shortfall in 2013, when payroll tax collections will not be enough to cover monthly checks for retirees.

At that point, the retirement system should be able to draw on its sizable surplus, which is invested in Treasury IOUs. But because the federal government keeps running a deficit, that money is being spent to cover ordinary expenses. The consequence: Government will have to borrow, raise taxes or cut benefits when the baby boomers retire.

``The trust fund surpluses are a bookkeeping entry,'' said Carol Cox Wait of the watchdog group Committee for a Responsible Federal Budget. ``We have spent the money. It is gone.''

Nonetheless, Social Security's troubles are not as bad as in 1983, when the program was last overhauled to raise taxes and scale back benefits. Back then, the retirement system had to get an emergency loan from Medicare to cover monthly benefit checks.

``This is not going to be a problem for the next 10 or 15 years,'' said former Social Security chief actuary Robert Myers. ``On the other hand, you don't want to wait until you're at the brink of the precipice. It might be a good idea to do something next year.''

The sticky part is that ``doing something'' involves taking the very steps that politicians are telling voters they would never consider. Among the options:

Raising the retirement age. The current schedule for gradually raising the retirement age to 67 could be speeded up, or the age at which people can retire with full benefits could be raised even further, to 70. Because future retirees can expect to live longer, some argue they should also work more years.

Taxing a greater share of Social Security benefits. Proponents point out that income from most private pensions is taxed, and Social Security should be no different. Benefits are tax-free now for single people making less than $25,000 and married couples making less than $32,000.

Nicking the annual cost-of-living-adjustments. A one-time 0.5 percent cut would cost the average retiree $3 a month, but save the system $7 billion over five years.

Changing the benefits formula. Under this scenario, future retirees would get slightly lower benefits. It may be less controversial than cutting cost-of-living allowances for current retirees.

Increasing payroll taxes. Last time Social Security got into trouble, then-President Reagan and congressional Democrats agreed on a hefty tax increase for workers and employers. This time around, it probably won't be much different.

These ideas are not part of some radical plot to sabotage Social Security. Most of them were in a bill introduced this year by former House Ways and Means Chairman Dan Rostenkowski, D-Ill., a close ally of President Clinton. Rostenkowski lost his chairmanship after his indictment on corruption charges.

The American Association of Retired Persons - while not endorsing the specifics of Rostenkowski's plan - praised it for attempting to spread the pain evenly among workers, current beneficiaries and those nearing retirement. ``It's the right framework to think about,'' said AARP lobbyist Martin Corry.