08/27 17:49
U.S. to Use $9 Billion From Social Security, CBO Says (Update3)
By Laura Litvan
Washington, Aug. 27 (Bloomberg) -- The federal government will spend $9 billion of the Social Security trust fund to pay for other government operations this year, the Congressional Budget Office will report tomorrow. Such a move would violate a promise by lawmakers of both parties not to use Social Security receipts for other purposes.
The non-partisan CBO, in a 65-page report prepared for Congress, says the overall U.S. surplus will drop to $153 billion for the fiscal year ending Sept. 30. That's 44 percent less than a May estimate of $275 billion, and it's $5 billion less than what the Bush administration projected last week.
``This has a devastating effect on the budget debate,'' said Stan Collender, a budget analyst with Fleishman-Hillard Inc. ``It leaves no one room to maneuver and everyone a chance to point a finger at somebody else to blame them for what happened.''
The shrinking surplus comes as President George W. Bush and both parties in Congress seek political advantage going into next year's mid-term elections. The first test comes next month, when legislators decide between cutting funds for some programs or breaking their Social Security pledge.
CBO estimated next year's surplus at $176 billion, with all but $2 billion coming from Social Security.
Turning Up the Heat
Democrats in Congress are turning up the political heat on Bush, maintaining that it will be up to him and congressional Republicans to offer a plan to complete the budget for next year without ``raiding'' Social Security or a separate trust fund for Medicare projected to run a fiscal 2002 surplus of $38 billion.
``What the CBO confirms today is what we've been saying all along: that the Bush budget will force an invasion of the Social Security and Medicare trust fund surpluses,'' said Representative John Spratt, top Democrat on the House Budget Committee. He blamed Bush's $1.35 trillion tax cut for creating a ``spartan'' budget climate that will thwart plans to create a Medicare prescription drug plan for seniors, boost funding for medical research and defense, or improve other programs.
White House budget director Mitch Daniels said keeping the surplus at a level equal to the Social Security trust fund is a ``symbolic'' goal that shouldn't get in the way of increased spending for defense.
``It would be a big mistake to short-change priorities in pursuit of a symbolic goal that may well be in hand anyways,'' Daniels said in a conference call.
The Social Security and Medicare trust funds ``are unaffected'' by the size of the surplus, Daniels said.
``We ought to proceed on to an orderly budget season in which spending is restrained but the nation's priorities are met,'' he said.
Less Growth
The Social Security retirement system is currently running a surplus because receipts from payroll taxes exceed the benefits being paid out. That will change by 2018, when many of the 76 million baby boomers are collecting benefits. The government has used some of those funds to provide for more spending in the past without defaulting on benefits to seniors.
The CBO estimates the surplus over the next decade will be $3.4 trillion, down from $5.6 trillion in the May estimate. The decline stems from a slowing economy and reduced revenue for the government due to Bush's $1.35 trillion tax cut.
In making its new surplus forecast, the CBO is assuming the economy will grow at a 1.7 percent annual rate this calendar year, after adjusting for inflation. In January, the agency expected growth this year to reach 2.4 percent.
Next year, the agency assumes the economy will continue to skirt a recession, with real gross domestic product growing at 2.6 percent. The White House estimated growth at 3.2 percent. Over 10 years, growth will average about 3.2 percent, the agency said, up from 3.1 percent assumed in January.
Less Revenue
The tax cut accounts for much of the estimated decline in the surplus over the 10 years. In addition to the $1.35 billion in lower revenue, the tax cut helps boost interest on the debt by $413 billion. Congress approved new spending this year that gobbles up another $83 billion over the next decade.
The slowdown in the economy will shave $283 billion off the surplus between fiscal 2002 and fiscal 2011, the agency said. Of that, $48 billion will be in fiscal 2002.
The agency said debt held by the public would drop from about $3.3 trillion this fiscal year to $876 billion in fiscal 2011 under its new economic assumptions.
Last week, the White House released a slightly different set of numbers, forecasting a surplus of $158 billion this fiscal year and a surplus outside Social Security of $1 billion. The differences between the two agencies stem, in part, from different assumptions in accounting for Social Security tax payments. |
