Rostenkowski offering plan to save Social Security

April 19, 1994|By New York Times News Service

WASHINGTON -- Rep. Dan Rostenkowski, the chairman of the Ways and Means Committee, plans to introduce legislation today designed to make Social Security financially sound for the Baby Boom generation by reducing next year's cost-of-living adjustment, increasing the retirement age and boosting payroll taxes beginning in the year 2020.

Some of the proposals, standing alone, would provoke a political outcry. But Mr. Rostenkowski says he hopes they would be acceptable as part of a comprehensive plan to preserve Social Security for future generations.

Some combination of changes like those proposed by Mr. Rostenkowski has a good chance of passage. Social Security trustees said last week that unless Congress acted, the Social Security trust funds would run out of money in 2029, seven years earlier than projected last year.

The trustees said that Congress should worry about the problem now, when the solution is relatively painless. Bigger changes would be required in later years if lawmakers defer action, the trustees warned.

In opinion polls, young workers often say that they doubt Social Security will be available to them when they retire. Mr. Rostenkowski says his proposal would restore confidence in Social Security and guarantee the Treasury's ability to pay all promised benefits for at least 75 years. He says he hopes the proposal would stimulate debate on ways to solve the long-range problems of Social Security without drastic cuts in benefits or sharp increases in taxes.

Under Mr. Rostenkowski's proposal, all Social Security beneficiaries, about 42 million people, would receive a smaller cost-of-living adjustment in January 1995. The increase was expected to be 3 percent, but Mr. Rostenkowski's proposal would limit it to 2.5 percent.

As a result, the average monthly Social Security benefit, now $674, would rise to $691 in 1995, rather than $694. In the past, protests by elderly people have blocked proposed cuts in cost-of-living adjustments.

Previous proposals to reduce COLA payments to current retirees have provoked outcries from senior citizen groups.

There was no immediate reaction from the American Association of Retired Persons or other groups representing the elderly to Mr. Rostenkowski's proposal.

Mr. Rostenkowski is also proposing a tax increase for Social Security beneficiaries who are single people and have incomes of $25,000 to $34,000 a year or are married couples with incomes of $32,000 to $44,000.

Under current law, these people must count up to half of their Social Security benefits as taxable income. Under Mr. Rostenkowski's proposal, up to 85 percent of their benefits could be included as taxable income.

The change would affect 13 percent of Social Security beneficiaries, about 5.5 million people.

Single people with incomes of more than $34,000 and married couples with incomes over $44,000 are already subject to this requirement.

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