If successful in what are likely to be two of the final items on his agenda, President Bill Clinton will leave a legacy of something besides presiding over a strong economy and being impeached. The president’s plans for Social Security and Medicare, announced this week, are neither dramatic nor the last word on the issues, but they are important pieces of government policy that could affect millions of Americans in the coming decades.

Congress, too enamored with political drama for the last couple of years to take up the difficult job of legislating, needs to respond with cooperation and a commitment to strengthen these two essential programs for seniors. Fortunately, the news that Washington is bursting with unanticipated tax dollars should make a compromise easier to reach.

Social Security

The reason for acting on Social Security now is straightforward: Given the level of benefits paid out, increased life expectancies and fewer wage-earners vs. retirees starting early in the next century, the Social Security payroll tax by 2015 no longer will be enough to cover benefits. By 2023, the interest in the Social Security Trust Fund won’t be able to cover the shortfall. By 2034, the principal in the trust fund will not be able maintain payments.

These estimates are conservative and, although they sound bleak, can be repaired without tearing apart the system that has been hugely successful in keeping people out of poverty. President Clinton offered ideas for shoring it up that properly respect the importance of the program and the relative size of the problem. His proposal would use Social Security revenues, worth about $3 trillion over the next 15 years, to eliminate the federal debt, and then apply the savings in interest payments to extend the life of the retirement benefit to 2053.

The plan makes compromises to congressional concerns about the use of the Social Security surplus to mask the size of the federal deficit (with the latest budget projections, there is no deficit). It also backs off the president’s original goal to ensure the solvency of the system for at least 75 years, thereby opening up the possibility of tax cuts and spending for other social programs. Some members of Congress will question the president’s plan to buy stocks and corporate bonds with trust fund money, but the key element in the president’s proposal is his willingness to use the higher federal revenue as a lever for negotiation.

Medicare

The challenge of Medicare is not only that the growth in the demand for the health-care system will in the coming years run ahead of the funds to pay for it, but that the benefits offered under Medicare are inadequate. Specifically, the lack of coverage for prescription drugs has meant that some seniors have huge out-of-pockets expenses for medicine as drug companies turn to them for profit after cutting deals with health-maintenance organizations.

This added burden on the elderly grows more acute as drugs make up a larger and larger percentage of all health-related costs. Kevin Concannon, commissioner of the Department of Human Services, recently testified before Congress that Maine ‘s Medicaid program, for instance, spends $140 million a year on prescription drugs compared with $40 million a year on doctors’ services. That difference will become more exaggerated if the drug inflation rate continues at 11 percent, as it has for several years, vs. the 5 percent growth in the overall health-care industry.

The Clinton administration estimates that 15.5 million Medicare beneficiaries have no prescription drug coverage. But, as with Social Security, the budget surplus makes it possible for Washington to create a plan that extends the life of Medicare while expanding drug coverage. This is especially true if the White House goes further in its adoption of a proposal by Rep. Tom Allen to negotiate with drug companies over prices, just as the administration has proposed doing with hospitals and providers of goods such as wheelchairs and other medical equipment.

The Clinton proposal stresses three areas: increasing competition by encouraging managed-care companies to offer a defined benefit package; expanding access to preventive care by removing deductibles, and extending the life of Medicare by dedicating 15 percent of the federal budget surplus to the health program. In addition, the plan sets aside $7.5 billion over 10 years to adjust payments to areas of the health-care industry hit particularly hard in recent years by Balanced Budget rules. The package is a sensible start to what should be a vigorous debate on the direction of government-sponsored health care in the United States.

Neither Social Security nor Medicare reform would happen without the current budget surplus. With it, the federal government can make smart investments to protect retirement savings and expand health care. The choice in Congress is to either develop an agreement with the White House on these issues or leave them unresolved, the better to bludgeon the opposing party in the 2000 election.

Is there any doubt which the public would prefer?