Social Security warning causes stir
White House budget chief forecasts $9 billion from surplus may be needed to pay bills
WASHINGTON, Sept. 7 — The Bush administration’s budget chief warned top congressional Republicans on Friday that the Social Security surplus is on track to be tapped for other programs this year. The news prompted a hastily called Oval Office meeting between President Bush and top Republican leaders.
DIPPING INTO the Social Security surplus would be a politically perilous event that Bush and lawmakers from both parties have repeatedly promised to avoid.
An alarmed House Speaker Dennis Hastert, R-Ill., and Senate Minority Leader Trent Lott, R-Miss., hurried to the White House to discuss with Bush options for avoiding that scenario.
Republicans, particularly in the House where lawmakers face re-election next year, are nervous that Democrats would use the turn of events against them. Democrats have blamed the problem on the price tag of the 10-year, $1.35 trillion tax cut Bush pushed through Congress.
SOCIAL SECURITY TO LOSE $9-15 BILLION
Budget director Mitchell Daniels told House GOP leaders that the bite out of Social Security could be about $9 billion, said several Republicans speaking on condition of anonymity. One aide said Daniels told them it could be as much as $15 billion.
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While that would have no effect on the program’s solvency and would still leave this year’s surplus the second biggest ever, it could violate a pledge that most politicians are adamant about obeying. Many of them worry that Americans believe the giant pension program for the elderly and disabled would be weakened if even small portions of its annual surplus are used for other federal activities.
Bush and the leaders made no decisions about what to do, aides said. Among the options Hastert offered were across-the-board spending cuts that would be triggered automatically should Social Security’s surpluses be eroded, and trimming Bush’s request for higher defense spending, they said.
White House officials would not comment on the situation. A spokesman for Senate Majority Leader Tom Daschle, D-S.D., while declining to say how Democrats would fix the problem, was quick to drop it on the White House’s lap.
“It’s refreshing to see someone in the administration owning up to the problem, even though the president hasn’t,” said Daschle spokesman Douglas Hattaway.
BUSH SKIPS OVER ISSUE
The president, emerging from his session with the GOP leaders, made no mention of the Social Security situation. Instead, he focused on the day’s other troublesome economic news: that the nation’s unemployment rate had risen to 4.9 percent last month, a 0.4 point increase that was the largest in six years.
“I want the American people to know we’re deeply concerned about the unemployment rates, and we intend to do something about it,” Bush said.
Just last month, the White House budget office said this year’s projected $157 billion Social Security surplus would not be used to finance other federal programs, and that the overall federal surplus would be $158 billion.
But the nonpartisan Congressional Budget Office has estimated that $9 billion in Social Security funds would be needed.
The current fiscal year, 2001, ends on Sept. 30, giving the administration little time to find the savings that would be needed to avoid dipping into Social Security.
SPENDING CUTS PROPOSED
Many House Republicans favor immediate, automatic spending cuts in next year’s budget by whatever amount this year’s Social Security surpluses are drained.
But the idea received a lukewarm reception from many White House officials and Senate Republicans. They worry it would make the already tight budget for next year even tighter, and would cut so many programs that even many Republicans might balk.
In addition, there was some concern that if Bush embraced a broad spending reduction, it could let Democrats argue that the tax cut was causing problems.
Even so, House Majority Leader Dick Armey, R-Texas, was likely to broach the idea of automatic spending cuts publicly in a weekend television appearance. And Sens. George Voinovich, R-Ohio, and Zell Miller, D-Ga., are expected to introduce a version of the plan next week. Miller often sides with the White House on fiscal matters.
It was unclear what prospects such a proposal would have in the Democratic-controlled Senate. Democrats — and even many moderate Republicans — have traditionally opposed across-the-board spending reductions.
Some in the GOP feel that even if the Senate kills the plan, Republicans would win politically because they would be able to blame its demise — and the erosion of Social Security surpluses — on Democrats.
Just this week, Daniels sent a memo to agency heads urging them to constrain spending in the year’s final weeks in an effort to avoid siphoning Social Security funds.
UNEMPLOYMENT A GROWING CONCERN
Several aides said the White House meeting was originally sought by administration officials to discuss the day’s gloomy unemployment news. But they said Hastert and Lott used the session to discuss the Social Security problem with Bush and his top aides.
The alarming unemployment news triggered a stock market sell-off, sending the Dow Jones industrials tumbling more than 230 points and the Standard & Poor’s 500 index to its lowest level in nearly three years.
Employment picture could get worse
With mid-term elections only 14 months away, Daschle ratcheted up the pressure on Bush and the Republicans earlier Friday by pinning the blame for the slumping economy directly on the president.
Daschle charged that “the Bush budget and Bush economy” had caused unemployment to rise.
Speaking after the meeting, Bush urged Congress to pass an energy plan to create jobs and a bill that would allow swift negotiation of trade deals with foreign countries to increase exports of U.S. goods.
The president also touted the tax cut he signed into law in June: “Beginning on January 1, Americans will see lower tax rates, lower withholding from their pay checks and a larger tax credit.”
He took special care to argue that the economic slowdown started before he took office. “Too many people are losing their jobs as a result of a slowdown that began when [Vice President] Dick [Cheney] and I were campaigning across our country last summer,” Bush said.
ANOTHER TAX CUT?
Worried about Republican prospects in the 2002 elections, Lott and Hastert have proposed a temporary cut in the capital gains tax rate to stimulate the economy. The tax is imposed on profits from the sale of stocks, real estate and other assets. Bush said nothing about the proposal Friday, while Daschle said he opposed it because capital gains tend to be concentrated among higher-income individuals.
Bush stopped short of announcing any new initiative on spending cuts to forestall budget deficits and turned away from news cameras as reporters tried to question him.
MSNBC.com’s Tom Curry, The Associated Press contributed to this report.
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