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The Social Security Administration is in crisis. The needy are being penalized. Only Congress can solve the problem.

An agency study that found that thousands of Social Security recipients were mistakenly dropped from the rolls last year uncovered only a fraction of the problems. The public can expect service to deteriorate further.The study found that benefits should not have been suspended for 84 percent of the poor, aged, blind and disabled who were dropped from the rolls. It concluded that the problem was related to a diminishing staff and increasing workload.

The Social Security Administration has gone downhill since 1981, when Ronald Reagan became president. He endorsed a plan to reduce the staff from 80,000 to 65,000 by 1990. While his administration promised that benefits were sacrosanct, President Reagan, Congress and Social Security Commissioner Dorcas Hardy reduced services as part of the policy to balance the federal budget.

Hardy dictated that the agency's operations become more "business-orientated." Beneficiaries and claimants became "customers." Face-to-face services were dramatically reduced, and some were eliminated.

Hardy said the public "preferred to do business by telephone"; in fact, the public did not, but she did. Contact stations, which served rural areas, were shut. Field representatives, who traveled to meet with individuals too ill or infirm to visit a Social Security office, were phased out.

Computers were purchased to perform duties handled by employees, and a toll-free number was installed to accommodate those who could not visit an office. Hardy insisted that these technological advances would compensate for staff reductions and improve overall service. But a Government Accounting Office study concluded that the agency's computer capacity was overestimated by 75 percent.

The toll-free service has damaged the agency's credibility. Phone-service centers replaced, rather than complemented, local call-in service.

The agency assigned untrained, inexperienced personnel to handle the phones during busy periods. The phones get answered, but the quality of the answers leaves a lot to be desired.

Employee morale has plunged. The agency admits that its employees are underpaid by 30 percent. In most offices, labor-management relations are bitter.

Gwendolyn King, the new commissioner, has neither the power nor funding to breathe life back into the moribund agency. It is up to Congress to fund the personnel and resources necessary to provide the service Americans deserve - service they have paid for.