To cover the estimated $800 billion in lost payroll taxes over the next 10 years, Kerrey and Moynihan propose:

Reducing by one percentage point all cost-of-living adjustments in federal tax (including income tax) and benefit (except aid to the impoverished elderly and disabled) programs. Many economists have concluded that the official Consumer Price Index still overmeasures true inflation by roughly that amount.

Extending the payroll tax to cover earnings up to $97,500 by 2003 instead of the currently projected limit of $82,800--though the tax would still hit only 87 percent of all wages, compared with a historical level of 90 percent.

A speedup in scheduled increases in the retirement age (to 68 for persons turning 62 in 2017) to take account of further gains in longevity.

Applying the federal income tax to Social Security benefits (already partially taxable) in the same way that private pensions are taxed, i.e., all benefits in excess of an individual's own contributions are included in taxable income.

Requiring all state and local government workers to be included under Social Security, a move long favored by reformers who point out that the majority of such workers escape taxation but draw benefits anyway, either as spouses or part-time workers.

After the year 2024, reraising the (combined employer-employee) payroll tax rate from the 10.4 rate to which the plan would cut it. But the rate would not rise above the current 12.4 percent level until 2045.