U.S. Will Take $9 Billion in Surplus Social Security Funds, Figures Show

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U.S. Will Take $9 Billion in Surplus Social Security Funds, Figures Show

Finances: Congressional Budget Office report runs counter to White House's scenario. Bush team downplays difference.

By ROBERT A. ROSENBLATT, LA Times Staff Writer

WASHINGTON -- The federal government will dip into surplus Social Security funds for $9 billion by the end of September, according to Congressional Budget Office figures obtained Monday that contradict the Bush administration's rosier projections.

Last week, the White House said the government would conclude the fiscal year with a surplus of $1 billion, excluding nearly $158 billion in excess funds collected through payroll taxes for Social Security.

The CBO "figures represent only the beginning of the bad news," with more spending increases expected for defense and education, Rep. John M. Spratt Jr. (D-S.C.), the ranking minority member on the House Budget Committee, said Monday.

But Mitchell E. Daniels Jr., President Bush's director of the Office of Management and Budget, contended that the CBO numbers are close enough to the administration's estimates to make the differences numerically insignificant. "The fundamental reality is, we are looking at enormous surpluses," Daniels said.

Although the debate may be about arcane budget statistics, the political consequences of the varying surplus estimates could prove to be crucial: The administration will fight to get Congress to approve additional defense and education dollars, while Democrats will accuse the White House of endangering the future of the Social Security trust fund. As they gird for the budget debate, both sides are looking to the election campaigns of 2002.

The CBO report projects a federal budget surplus of $153 billion for the current fiscal year, which ends Sept. 30. That is a bit lower than the $158-billion surplus forecast last week by the Bush administration. But both reports agree that virtually the entire surplus comes from Social Security. The congressional figures, to be released today, were obtained through congressional sources.

The Bush administration said the Social Security trust fund would not be touched this year, while the CBO said it would be tapped for $9 billion.

As the CBO numbers leaked out Monday, the partisan reaction was vigorous. Democrats blamed the Bush administration for shrinking the surplus and threatening key spending priorities, while Republicans echoed the president's comment of last week that a smaller, protected surplus is just what is needed to force Congress to cut spending.

"President Bush actually put a straitjacket on America's schools, seniors and states who need Congress to follow through on priorities such as a Medicare prescription drug benefit and new education initiatives," said Rep. Robert T. Matsui (D-Sacramento), a member of the House Ways and Means Committee. "This administration went back on its promise to the American people to protect the Social Security trust fund and should not be trusted to protect our priorities in the future."

Firing back, House Speaker J. Dennis Hastert (R-Ill.) denounced those in Washington who "may want to play politics and fan the flames of rhetorical fear." He promised that "every dime collected for Social Security and Medicare will be spent solely on Social Security and Medicare."

Social Security has run a surplus for years, with the payroll tax revenues collected from 140 million workers and their employers exceeding the program's payments to 44 million beneficiaries. The argument now is focused on how much of the surplus should be used to retire the nation's debt, and how much should go toward current government programs.

Both parties face tough decisions as Congress returns next week to finish work on the budget bills for the current and the 2002 fiscal years. Republicans and Democrats alike have adamantly opposed using any of the Social Security surplus, but it may be hard for them to keep those promises.

The president wants to spend an additional $1.9 billion for education reform and testing, but the House approved $4.6 billion more and the Senate wants to expand outlays by $14 billion. Republicans could be torn between loyalty to the president and the problem of voting for spending that comes out of the Social Security trust fund. Similarly, Democrats might want to boost spending, but then they could be accused of tapping the trust.

For the military, the president wants $18 billion more, posing another loyalty test for Republicans. Democrats have indicated they won't support such a large increase.

"There's going to be a very difficult fall for all of us because of [Bush] having a budget plan that didn't add up," said Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee.

The Bush administration's OMB estimate and the figures from the Congressional Budget Office are not drastically different, given that total federal spending for the year is more than $1.5 trillion. The Bush number-crunchers used some technical changes and assumptions that enabled them to come in with a bare $1-billion surplus in the non-Social Security budget, thereby keeping their promise to leave Social Security untouched.

"These are reasonably small differences when you take everything into account," budget director Daniels said.

Huge unexpected swings in federal tax revenues make long-range projections dubious at best. In May, for example, the CBO forecast a $275-billion surplus for this fiscal year. But Bush's tax cut, approved by Congress, sliced away more than $70 billion and the slowdown in economic activity pared more than $40 billion.

The impact is more political than substantive for ordinary citizens who don't participate in Washington's budget debate. The significance will come in how the debate shapes actual spending for defense, and for the proposed Medicare prescription drug benefit. Officials in the administration and members of Congress will be debating whether their respective parties get more mileage from the drug benefit or from holding the line on the budget and keeping the surplus intact.

Both political parties ignore the reality that money collected by the government is spent immediately, either on federal programs or on paying down the national debt. Unlike an individual, the federal government cannot invest in stocks or savings accounts that put aside resources for the future.

The surplus from Social Security cannot be put aside. It goes elsewhere in the government, and the Social Security trust fund receives in return a special issue of Treasury securities that must be redeemed later to make good on Social Security promises. These are obligations of the Treasury that must be made good by raising taxes, cutting government spending or by borrowing.

Social Security's financial crisis is predicted for 2038, when all the surplus securities will have been cashed in, and it is estimated that taxes will be sufficient to pay only 72% of benefits promised under current law.

-- PHO (owennos@bigfoot.com), August 28, 2001

Answers

"A billion here, a billion there, pretty soon your talking about big money" Anybody remember who said this?

-- PHO (owennos@bigfoot.com), August 28, 2001.

Barry Goldwater...? not real sure

-- Sam (Wtrmkr52@aol.com), August 29, 2001.

It's from Senator Everett Dirksen. The exact quote is "A billion here, a billion there, pretty soon it adds up to real money."

-- Barb Knix (barbara-knox@iname.com), August 30, 2001.

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