President Clinton's economic advisers and Democratic congressional leaders have concluded that retirees receiving Social Security benefits and government pensions should pay a significant part of the price of deficit reduction, officials in the White House and Congress said this week.
But the advisers and the top lawmakers disagree over how they should pay: whether through limiting cost-of-living increases in benefits or by increasing taxes on benefits. Clinton has not come down on either side, the officials said, but they added that Senate leaders had warned him that any attempt to freeze benefits would be rejected by the Senate.Over the years, cuts in Social Security have been thought to represent political suicide. But administration officials and Democratic lawmakers seem to agree that they cannot exempt the elderly when asking all Americans to make equal sacrifices to reduce the budget deficit.
The mere fact that the Democrats are talking about either limiting Social Security payments or taxing them more heavily is an indication of how difficult it will be to lower the deficit and how serious the new administration is about tackling the problem. The 30 million retirees who receive Social Security checks each month are a powerful political force.
But one official said that Social Security cuts were being considered because, "we have picked the bones clean of the easy political choices, and none are left."
Social Security is only one of scores of difficult budget decisions in the offing. Other elements of the deficit-reduction package will almost certainly involve higher taxes on the wealthy, a new energy tax, stiffer enforcement of tax laws affecting foreign corporations with operations in the United States and reduced spending for the military and various domestic programs.
Some of those measures could also be politically unpopular. But Clinton's goal of cutting the $300 billion deficit nearly in half by the time he leaves office cannot be accomplished without political cost.
Providing an account of a meeting at the White House last Wednesday, the officials said that Leon Panetta, the budget director, strongly advocated a one-year freeze in cost-of-living increases for Social Security recipients and retired federal workers who receive civilian or military pensions.
Social Security checks, which now average about $650 a month, rise each year to reflect the previous year's rate of inflation.
Panetta's plan was supported by Rep. Richard Gephardt of Missouri, the House majority leader, but senators at the meeting vigorously opposed it, saying the plan stood no chance of passage in the Senate.
The senators - including George J. Mitchell of Maine, the majority leader; Daniel Patrick Moynihan of New York, chairman of the Finance Committee; and Jim Sasser of Tennessee, chairman of the Budget Committee - asserted that it would be fairer to make a larger portion of Social Security benefits subject to income taxes, a method they said would raise at least as much revenue as a freeze would raise.
Under current law, retired couples with annual incomes above $32,000 and individual retirees with incomes above $25,000 must pay income tax on half of their Social Security benefits.
Treasury Secretary Lloyd Bentsen, a former Texas senator, tended to side with the senators, according to reports from the meeting; Clinton reportedly said little and did not indicate where he stood.
Clinton's spokesman, George Stephanopoulos, said Thursday that Social Security changes were under consideration but that no decisions had been made.
The White House said Clinton and his advisers were working on the economic plan at Camp David over the weekend. Another meeting with congressional leaders is scheduled for Monday evening.