Speaking at the Kennedy school of Government's ARCO Forum yesterday afternoon, Sen. Daniel Patrick Moynihan (D-N.Y.) outlined a sweeping tax reduction which he called the only way to save Social Security.

Moynihan said he and Senator Bob Kerrey (D-Neb.) would soon unveil "The Social Security Solvency Act of 1998," calling for a 10-year, $800 billion cut in payroll taxes and the introduction of a "pay-as-you-go" system that would take in only as much money as the system needed in a given year.

"We can save this system. It's not very hard," Moynihan said of Social Security, first introduced as an economic safety net for victims of the Great Depression.

"We only have to have the will to do it, and that might be impossible."

Moynihan said he feared the Social Security system, while robustly funded at present, could be insolvent in as little as 30 years without far-reaching reform.

"I stand here and say if we will not make these changes we will lose this system," he said.

The changes include a gradual cut in payroll taxes, which will drop from their current 12.4 percent annually to a low of 10.4 percent in 2001.

Workers would be allowed to put this tax cut into a personal savings account--Moynihan's mechanism for insuring that individuals provide for themselves in retirement--or take 1 percent more in take-home pay.

This fairly massive cut would be balanced in Moynihan's system by an increase in the overall tax base-- including eventual increases in the amount oftaxable wages and the legal retirement age.

The net result would be an annual tax revenuesufficient to pay that year's Social Securitybills. In consistently providing for the system'sshort-term bills, Moynihan said he hopes to ensurelong-term solvency.

The speech was part of the Spring Exercise, atwo-week Kennedy School program during whichstudents write their own proposals for SocialSecurity reform