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WE FISCAL HAWKS are presumed to be distraught over the Senate's failure to pass the balanced-budget amendment. But there is a silver lining. Victory could have been worse than defeat.

The Senate leadership might have paid the price demanded by wavering senators, which was to exempt the Social Security trust funds from the amendment's definition of budget balance. It would have ruined long-term budget reform.Trying to achieve long-term budget balance without touching Social Security is like trying to clean out the garage without moving the Winnebago.

One might have hoped that the amendment would steer the nation toward a sustainable fiscal approach: Go easy if necessary in the short term, but make certain that the long-term goal of budget balance is fully met.

Perversely, the Social Security exemption would have stood this strategy on its head. It would have inflicted needless near-term pain while letting the long-term problem metastasize.

In the year 2002, the first year the amendment was to take effect, the balance in the trust funds is projected to be $111 billion. Thus, instead of cutting spending or raising taxes for that year by $322 billion - a herculean task - Congress would have to find $433 billion.

Yet in the long term all this sacrifice buys nothing. For it's in the long term that an exemption for Social Security would cause its worst damage.

Look at the numbers. The annual Social Security surplus is projected to peak in 2001 (at $156 billion) and then head downhill. By 2019, as baby boomers retire en masse, the trust funds' combined balance will turn negative. By 2050, the deficit will be $5.5 trillion.

If Americans have yet to focus on these frighteningly unsustainable numbers, it is because they like to think that benefits are paid out of "trust funds" in which contributions and interest have been set aside. In fact, Social Security has always been a pay-as-you-go system. Its "trust funds" are travesties on the word trust. They have never held anything but government paper.

Consider three scenarios that could unfold if Social Security is exempted. We could try financing these costs through borrowing. But as financial markets and foreign investors begin to see the malignant trend lines forming, we would see extraordinarily volatile and dangerous effects on interest rates, inflation rates, equity markets and the dollar.

We could try to raise payroll taxes enough to continue Social Security's status quo. That option, objectionable in today's political climate, would mean a large reduction in the after-tax living standards of young working families.

Social Security payroll taxes would have to rise 38 percent by the year 2010 to maintain promised benefit levels.

There is a third option, and that is to wait until we have no other recourse but to enact a sudden and immediate cut in benefits.

Future historians may record the irony that Social Security's "defenders" of the '90s - who wanted to exempt the program from gradual and timely reform - succeeded only in wrecking this safety net for those who needed it most.