GOP Attacks Payroll Tax Cut Plan : Social Security: Moynihan’s proposal is criticized as a ‘poison pill’ that endangers benefits. Senate Democrats say they will keep an open mind.

Republicans on the Senate Finance Committee Monday denounced a Democratic proposal to cut Social Security taxes as a “sugar-coated poison pill” that would jeopardize the payment of retirement benefits by the end of the decade.

The sharp GOP criticism came at the first hearing on a plan put forward by Sen. Daniel Patrick Moynihan (D-N.Y.) that has drawn support from some conservative Republicans in Congress and is being studied seriously by the Democratic leadership in both the House and Senate.

Eight Republicans on the panel spoke against the proposal to reduce payroll taxes by $62 billion over the next two years on grounds it would add to the deficit or require other tax increases to offset the cuts. President Bush has said he would veto the bill if it came to his desk. Sen. John Heinz (R-Pa.) made the strongest attack, charging: “The Moynihan plan is nothing less than a sugar-coated poison pill for Social Security, the equivalent of the medieval practice of purging the patient of disease by bleeding him to death. . . .”

Heinz also said the proposal would amount to the largest business tax cut in history--a $27.5-billion tax cut for employers, who match employees’ payroll taxes for Social Security benefits.

In his opening statement, Moynihan said the nation’s basic retirement system was financed on a pay-as-you-go basis for decades before it was revised in 1983 to accumulate a large reserve.

“My legislation would put in the law a schedule of Social Security contribution rates that would finance benefits, and maintain a year’s reserve, for the next 75 years.”

Senate Republican leader Bob Dole of Kansas, opposing the plan, said: “I don’t find a lot of support in my state for cutting payroll taxes. Most people want us to leave things alone.”

Sen. Lloyd Bentsen (D-Tex.), the influential chairman of the committee, appeared more receptive to the Moynihan plan, noting that the buildup of Social Security reserves has occurred far more rapidly than anyone anticipated and that the trust fund was expected to grow rapidly for another 25 years.

“We are running substantial deficits in the general (federal) budget; we’re masking them with growing Social Security surpluses, and we can’t ignore that any longer,” Bentsen said at the outset of the hearing. “The Congress never really debated the issue of pay-as-you-go versus building up large reserves to pay for the future retirement benefits of the baby boomers.”

But Bentsen said he would await the testimony of experts at the hearings before deciding whether to support Moynihan’s legislation.

Sen. Donald W. Riegle Jr. (D-Mich.), another committee member, said he also was reserving judgment but indicated he was leaning toward Moynihan’s plan, noting: “This may be the best solution we can find.”

Social Security Commissioner Gwendolyn S. King opposed the Moynihan bill, describing it as “major surgery” to a system that was in sound financial shape.

“I believe such surgery would be both unnecessary and ill-advised,” King said.

Two former top officials of the Social Security Administration, however, split on whether payroll taxes should be reduced now.

Robert M. Ball, head of the Social Security system for more than a decade ending in 1973, said he opposed any reduction in the buildup of trust funds until 1993 at the earliest.

Robert J. Myers, former chief actuary of the Social Security Administration for 23 years, argued for the Moynihan plan in view of the rapid buildup of reserves under current financing provisions. He said the plan would not jeopardize retirement benefits.

President Bush’s proposal would gradually stop including Social Security surpluses when calculating the deficit--a plan some Republicans on the panel called too complicated. Moynihan pointed out that Bush’s plan would not begin until after the 1992 election, allowing the Administration to keep benefiting from the surplus when calculating the deficit.

Dole said a GOP substitute for Bush’s plan would be introduced that more quickly prevents use of the trust fund to finance the government’s operating deficit.