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More time for Social Security

Doomsday for the baby boomers has been delayed for a few years.

The government said Tuesday that Social Security will be solvent an extra three years, until 2032. Medicare won't go bust until 2008 _ seven years later than expected.

Despite the good news, leaders in Congress and the Clinton administration said they still need to act quickly to fix the huge imbalance in both programs before the tidal wave of baby boomers begins to retire.

"Although there is no immediate financial crisis, the time to act is now to prevent a crisis from ever occurring," said Kenneth Apfel, commissioner of Social Security.

"The American people are ahead of Congress," said Senate Majority Leader Trent Lott, R-Miss. They "understand we need to take actions to secure Medicare for the next century."

Congress and President Clinton have appointed a commission that is supposed to announce a long-term, bipartisan solution next year. Today, the House of Representatives will consider creating a similar commission to tackle Social Security.

More than 44-million Americans will receive Social Security in 1998, and that number will grow by 45 percent over the next 20 years.

The real outlook for Social Security and Medicare is probably brighter than the reports from trustees of each the programs released Tuesday. The reports were based on conservative assumptions about economic growth and did not include the latest changes to the Consumer Price Index. About two weeks ago, the government reduced the CPI by 0.2 percentage points annually.

Because Social Security payments are adjusted each year based on the index, cost-of-living increases will be lower, which should mean Social Security will be solvent even longer.

Treasury Secretary Robert Rubin said the brighter outlook for Social Security was almost entirely due to the strong economy. Unemployment and inflation are at their lowest levels in decades, and with more Americans on the job, the taxes deducted from workers' paychecks to support Social Security are up.

Low inflation also kept yearly cost-of-living raises this yearto just 2.1 percent, the lowest in a decade.

Still, Social Security faces three crucial milestones over the next three decades as it becomes swamped by the retiring baby boomers:

In 2013, the cost of benefits will exceed the amount of money flowing into the system. But the government should be able to pay full benefits because of interest from the trust fund, which now contains $590-billion.

In 2021, the outlook gets bleaker. Social Security trustees will have to begin redeeming Treasury bonds to pay benefits.

In 2032, the bonds and the surplus will be exhausted. Incoming taxes will cover only 70 to 75 percent of the benefits.

The brighter prognosis for the Medicare trust fund, the Part A program that pays for hospital benefits, is largely because of last summer's Balanced Budget Act, which put tighter controls on fees paid to doctors and hospitals.

"What a difference a year makes," said Donna Shalala, secretary of Health and Human Services. Last April, the government predicted that Medicare trust fund would be bankrupt in 2001.

"In just one year's time, we've gone almost halfway toward fixing the long-range funding problem in Medicare Part A," Shalala said.

But administration officials said they continue to worry about dramatic growth in Medicare Part B, which pays for doctor visits and lab tests.

John Rother, chief lobbyist for the American Association of Retired Persons, said the report shows that Social Security "can be strengthened with relatively modest reforms, provided we act prudently within the next few years."

Congressional leaders and administration officials vowed that the good news from the reports would not slow their efforts to solve the looming problems of the baby boomers.

Sen. Charles Grassley, R-Iowa, praised President Clinton for being willing to touch Social Security, the highly charged "third rail" of politics. Grassley said it was crucial to act now.

"If we fix it now, it's not going to hurt anybody," he said. "If we do it 10 years from now, it will hurt everybody."

Said Apfel, the head of Social Security: "The sooner we take action, the more moderate those actions will be. The time to fix the roof is when the sun is shining."

_ Information from the Associated Press was used in this report.

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