(MONEY Magazine) – One of the critical issues of the coming decade will surely be the large and growing share of federal spending earmarked for the elderly. Overall, some 55% of federal social spending -- or roughly $348 billion a year -- goes to programs benefiting the 12% of citizens over age 65. But since seniors are more likely to vote than is the population as a whole, the major presidential candidates have been reluctant to address potential reforms of the two biggest federal entitlement programs for the elderly -- Social Security and Medicare. Instead, President George Bush and Democrat Bill Clinton have unabashedly courted the over-65 age group with promises to boost retirement benefits. Independent Ross Perot, however, has taken a more controversial tack, proposing to cut Social Security costs $20 billion a year, by his estimate. Perot's plan: Ban retirement benefits for people like himself, with net worths above $1 million (Perot's is way over, at more than $3 billion). Bush Administration economists challenge his math, saying Perot would have to scrap benefits for everyone earning more than $60,000 a year to save $20 billion. The likely Republican and Democratic nominees, however, are eager to increase benefits by raising the so-called earnings test -- the amount people ages 65 to 70 can make each year before surrendering any Social Security stipends. Neither Bush nor Clinton, however, say how they would pay for that break, which could cost as much as $7.3 billion a year. Today, retirees give up $1 in Social Security pay for every $3 they earn above $10,200. Although Clinton in March bashed former Democratic rival Paul Tsongas for suggesting modest cuts in Social Security benefits, the Arkansas governor himself would consider raising taxes on Social Security benefits going to ''very wealthy'' seniors. Right now, married couples earning more than $32,000, including half their Social Security benefits, are taxed; for singles the threshold is $25,000. Clinton has also backed away from his previous support for a two-year plan to trim the portion of income that wage earners pay into Social Security, from a flat 7.65% to 6.65%. Now he favors an income tax cut for middle-income people. President Bush, who opposes a Social Security tax cut, says such a move would threaten the stability of the $323 billion retirement fund, which could run dry by 2041. As for Medicare, which, according to government estimates, could go broke in 10 years, Perot again says millionaires shouldn't receive benefits. Bush and Clinton, though, also show political courage on this issue. Both propose to raise Medicare premiums for people 65 or older who earn more than $125,000 a year. Clinton will not say how much he would boost premiums and adds that he wouldn't hike them until after his national health-care plan takes effect. Bush's fiscal 1993 budget, however, proposed a tripling of monthly premiums for beneficiaries earning $125,000, to $95.40 from $31.80. Congress, aware of the political risk, has not acted on the proposal.

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