Reagan skirts red-hot issue of social security -- for now

Who's going to fix up social security? With 36 million Americans receiving benefits and 116 million making contributions, social security is in trouble. It is one of the most sensitive political issues in the United States today, and it has the largest political constituency. Something has to be done -- either smaller benefits or higher contributions, actuaries say.

All signs indicate that President Reagan didn't realize what he was getting into when he asked Congress to help him balance the budget by trimming the checks of 3 million Americans who receive the minimum social security benefit. On May 20 the Senate sent back its own message to Mr. Reagan. By unanimous vote , 96 to 0, it said "No" to the key parts of his proposed cuts.

Mr. Reagan originally had planned his Monday-night speech to the nation to deal with social security but thought better of it, reportedly on the advice of anxious Republican leaders in Congress. They are concerned that Democrats are going to make social security a major issue, coupled with the charge that Republicans are not interested in the plight of the little man. Reports to Washington indicate that millions of Americans are suddenly anxious about their retirement rights. Politicians blame each other.

President Reagan wrote congressional leaders July 18 that criticism of administration proposals on social security is due in part to "opportunistic political maneuvering, cynically designed to play on the fears of many Americans."

Senate Democratic leader Robert C. Byrd of West Virginia angrily replied July 21 that "your administration's proposed social security cuts are a breach of faith with the American people. . . . No administration has ever before attempted to balance the budget by reducing social security benefits."

Testimony of others adds to othe argument. David A. STockman, the director of the Office of Management and Budget, told a hearing that without remedial action "the most devastating bankruptcy in history will occur on or about Nov. 3 , 1982."

Trustees of one social security fund said this month that "without corrective action . . . the Old Age and Survivors Trust Fund will be unable to make benefit payments on time beginning in the latter half of 1982."

Congress, meanwhile, generally has avoided the issue, although going along with a few minor cutbacks. There is at once a feeling of awe over the size of America's biggest and most successful social program, and a belief that palliatives are available to alleviate the problem before making drastic overhaul.

A major political issues may be materializing here, some politicians say.

The three social security funds. Old Age, Disability, and Hospital Insurance , are all in trouble, but only the Old Age Fund faces a possible showdown in 1982. These funds cannot borrow from each other and are not financed from general tax revenue.

One temporary proposal would be simply to permit interfund borrowing. Senate Democrats have urged this. In the long run, something more drastic is necessary.

In 1977 Congress passed the largest tax increase in peacetime history to place social security on a "sound" basis.

But inflation has continued. Many payments are "indexed": If prices go up, the social security payments go up, too; t he system is tied to the economy.