SOS for SS

Always pungent Sen. Daniel Patrick Moynihan has gotten to the heart of America's Social Security problem. In a speech at Harvard this week he offered a specific, tough-minded formula for saving Social Security from the demographic collision it faces in future decades.

Moynihan, long an expert on Social Security, shrewdly weds (a) a conservative plan to allow workers to invest a portion of their SS payroll tax in a private nest egg to (b) a return to a Rooseveltian pay-as-you-go pension system.

As ranking Democrat on the Senate Finance Committee, he plans to propose such a reform immediately.

Compare that with the official Washington crawl on Social Security.

In his state of the union speech last month, President Clinton claimed to be concentrating mightily on Social Security, but then sent it out for yet another scrutiny by commission. Mr. Clinton also cast himself as a latter day Horatius telling politicians to keep their hands off federal budget surpluses. He said he was earmarking those surpluses to save SS.

Good theater. Poor economics. The best way to preserve those surplus revenues for a need starting two decades hence would be to use them now to reduce the national debt. That would trim those huge interest bills on the debt for years to come. And that, in turn, would allow more pay-as-you-go money for SS.

Instead, Clinton announced a clutch of new programs that would eat up the surpluses - despite iffy funding from tobacco revenues.

Hence the appeal of Moynihan's approach. It would allow Americans to voluntarily use as much as 15 percent of their SS payroll tax for personal pension savings accounts. Because that's optional and restricted to a modest percentage, it would minimize the danger that at retirement a pensioner might suffer from a market drop. And the upside - higher compounded returns over decades of savings - would compensate for increased risk.

Meanwhile, Moynihan would seek to ensure that the basic SS pension remains rock solid by assuring its yearly pay-as-you-go integrity. To make bearable the tax burden borne by next generation workers paying for their retiring baby boom parents, he adapts two existing ideas: (1) Speed the move to a standard retirement age of 70, reflecting longevity statistics. (2) Trim the rate of indexing for inflation.

There will be battles to come. But at least one of our most thoughtful political statesmen has gotten a realistic mix of elements on the table. Now it's up to his colleagues.