Fairness, Unfairness and Social Security

ELLEN GOODMAN

February 16, 1993|By ELLEN GOODMAN

Boston. -- Every parent who has presided over a family dispute has learned a thing or two about the importance of the word ''fair.'' Try parceling out anything from TV time to the last serving of pie and, if the decisions aren't made with laser-like precision, someone is going to storm out of the room crying, ''That's not fair.''

This gives you a rough idea of what President Clinton faces tomorrow when he presents an economic plan to a country often divided into squabbling factions. His plan is supposed to put everything on the table while keeping everyone in the room.

As the president put it in Michigan: ''So we have to put together a plan that keeps my commitment to you, invests in you and your pTC jobs, in your education, your health care, your future, that brings that debt down, that deals with the health-care crisis, and that does it in a way that's fair to all Americans.'' In my grandfather's words, good luck to you and the Red Sox.

We are at the end of 12 years that were patently unfair. We need not rerun the glorious details, but anyone who can divide has figured out that the rich got richer, the poor got poorer and the middle class . . . well, you remember the rest. There was a generational shift as well. The young grew poorer and the deficit shifted the elders' bills to the kids.

To give you an idea of how hard it is to turn the economy around and save money while satisfying the demands for fairness, turn off the talk radio, unplug the fax machine, take the phone off the hook, push the lobbyists out the door, and try thinking about one tough item: Social Security. Try putting the fairness grid over Social Security as it is and as it may change.

Do you think that Social Security is fair? OK. It has raised a large portion of the elderly out of the ranks of poverty. Those who worked for lower wages receive comparatively more in payments than those who worked at higher wages. The program takes the edge off economic inequality.

Do you think Social Security is unfair? OK. The government still sends the most money to the least needy. Those who earned the highest income may also have the largest private income in retirement, and yet still get the biggest checks from Uncle Sam.

Think it's fair to the recipients? Sure. Everybody who paid into the plan gets to take out. The elderly gave, now they receive.

Think it's unfair to the contributors? Sure. It's the current workers who actually pay for their elders. The working poor are often paying for the retired well-to-do.

Think of it as a sacred pact between the generations? Fine. Today's elderly paid for yesterday's elderly. We pay for them and our kids will pay for us. In the meantime Social Security helps relieve people of the burden of supporting their parents.

Think of it as a scam between the generations? Fine. Those who retired in 1980 had to live less than three years to get back what they and their employers put in, even with interest. But those who retire in 2030 are going to have to live 18 years to break even.

Social Security is a hybrid -- a popular, effective hybrid, but a hybrid nevertheless. It's part pension plan and part poverty program wrapped up as an entitlement. We respect it as a retirement plan and depend upon it as an anti-poverty program. It's probably not, uh, fair, to have such mixed expectations -- but there it is.

That's why blocking the cost-of-living increases is a lousy idea. It would hurt the poorest, undermining the system's effectiveness as a poverty program.

But it's also why fully taxing Social Security payments to the upper half of the recipients -- those with incomes of over $25,000 individually or $32,000 as a couple -- is a good idea. These are the people who regard it and use it as a pension plan. If it's a pension plan, it should be taxed like every other pension plan, taxed like income.

It's only a fluke of history that Social Security was ever exempt from income taxes. In 1940, when the IRS made that ruling, recipients were few, payments were low, and it was seen as a government gratuity.

By 1983, when Social Security was in deep trouble, Congress voted to tax half the money going to the upper half. In 1993, we're in a different sort of trouble. The social compact between rich and poor, old and young, is sorely frayed. So's the bank account.

Raising the Social Security taxes for the better-off elderly to the maximum 85 percent will not only raise money -- some $30 billion over the next five years -- but also lower hostilities between members of this fractious American family. Yes, we've got some overwhelming economic problems. But this is one thing we can do that is, in a word, fair.

Ellen Goodman is a syndicated columnist.

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