Plan Seen Impoverishing 530,000 More

The curb on Social Security benefits proposed last week by President Reagan and leading Senate Republicans would push at least 530,000 additional persons under the poverty line during the next three years, the Congressional Budget Office estimated Wednesday.

The report by Congress’ nonpartisan budget research arm adds fuel to growing criticism of the proposal, which is a key element of the Republicans’ overall budget package. The GOP plan is aimed at slashing the deficit by about $52 billion in the next fiscal year. Democrats in particular are seizing upon the Social Security issue, which in the past has proved a potent weapon against Republicans at election time.

The congressional report came as White House Budget Director David A. Stockman, in a speech to the U.S. Chamber of Commerce, predicted that this year’s budget fight will be the “legislative battle of the decade.”

Prospects for Economy

Stockman warned that, with the deficit projected to exceed $220 billion next year, “what is at stake is not the budget of 1986 in some ordinary sense, but the shape of our fiscal affairs in this country for a generation and the prospects for our national economy throughout the remainder of this decade and into the next.”

Under the Republican proposal announced last week, Social Security recipients would receive cost-of-living increases equal to inflation minus 2 percentage points, with a guarantee of at least a 2% hike in benefits, in each of the next three years. By most forecasts, this plan would give pensioners a smaller increase than current law, which offers an increase equal to the full inflation rate if the consumer price index rises by at least 3 percentage points and nothing if inflation is lower than that.

To help poor families keep up with inflation, the Republican proposal would boost Supplemental Security Income benefits by $10 per month for individuals and $15 for families. But, even after accounting for this increase in the government’s basic aid programs for low-income aged, blind or disabled persons, the congressional office estimated that 530,000 persons who are near poverty now would fall below the official line, if inflation rises by its projections of about 4% a year through 1988.

Different Estimates

Using the Reagan Administration’s slightly different inflation estimates, the congressional office predicted that the proposal would put 570,000 persons below the government’s official poverty line. The Census Bureau’s definition of poverty, which is based on the size of a family and its total cash income, is often criticized because it does not include non-cash benefits such as food stamps in calculating family income.

A spokesman for the congressional office said the analysis of the proposal was requested by several congressional panels, including the Democratic-controlled House Budget Committee, which is expected to begin work soon on a Democratic alternative to the Republican proposal. The Senate is scheduled to vote on the Republican package during the week starting April 22.

In the past, Social Security has proved an explosive partisan issue. Reagan proposed cuts in the program in 1981 as a means of rescuing it from what appeared to be certain financial ruin. He withdrew his plan in a political firestorm that followed and appointed a commission to study the problem.

It was also a key issue in the 1982 congressional campaigns, in which Democrats were able to pick up 26 House seats, in part by accusing Republicans of planning to cut benefits. Congress enacted changes in the next year that made the system more stable financially and it now is running a surplus.