OOOPS Wonder when the Bush administration is going to admit that tax cut was a huge mistake...
Tax increases possible, Democrat says
Shrinking surplus may force use of Social Security funds for other programs
By Tom Curry
MSNBC
Aug. 28 — Opening the door to tax increases, a leading Senate Democrat said Tuesday that a plan to “raise revenue” could be needed to make up any budget shortfalls. But Sen. Kent Conrad, D-N.D., chairman of the Senate Budget Committee, said it is up to President Bush, not Democrats, to take the first step in proposing any tax increases or spending cuts THIS YEAR’S tax cut and the sluggish economy have shrunk projected budget surpluses, the Congressional Budget Office said in a report released Tuesday.
If the CBO forecasters are correct, $9 billion, or 0.45 percent, of this year’s total federal outlays of about $2 trillion will come from excess Social Security funds.
Conrad’s comments opened the door to tax increases — but only if Bush proposed them first.
“Let’s remember how we got here,” Conrad told a Capitol Hill news conference. “This is not the Democrats’ plan. This is a spending plan the Republicans passed. ... This is their spending plan, their tax plan — coupled with this economic downturn — that has put us in this position.”
Conrad said Republicans “now have the responsibility to come back and suggest how their plan be altered to solve a problem they have created.”
For starters, Conrad asked Bush to explain how he’d pay for the additional $18.4 billion in military spending that he wants this year. He said Bush was “putting us in a position for the next decade when we face either bigger benefit cuts, higher taxes or increased debt.”
RAISE TAXES?
Asked whether Democrats would favor cutting spending programs or borrowing Social Security funds to pay for current needs, Conrad replied, “Those aren’t the only choices. Obviously you can raise revenue, you can cut spending or you can engage in some combination.”
In reply to Democratic allegations that he had caused the surplus to vanish through “fiscal mismanagement,” Bush asked Democrats last week, “If you’re against tax relief, are you then advocating you’re going to raise taxes on the American people?”
Using excess Social Security funds to help pay for other programs would break a vow by Republicans and Democrats alike not to use Social Security revenue to finance other federal priorities.
In a campaign speech on May 15, 2000, President Bush said, “all Social Security funds in the surplus must stay where they belong — dedicated to Social Security. ... For years, politicians in both parties have dipped into the trust fund to pay for more spending. And I will stop it.”
In another campaign speech on Dec. 1, 1999, Bush said his tax cut plan “reserves all the Social Security surplus for Social Security itself. None of it will be used for new spending or tax reductions.”
SLIGHTLY DIFFERENT ESTIMATES
The CBO estimates the total budget surplus for the fiscal year that ends Sept. 30 will be $153 billion, while the White House Office of Management and Budget predicts it will be $158 billion.
In a note of optimism, the CBO report predicted “steadily increasing on-budget surpluses (will) re-emerge by the middle of the decade” and said, “Although economic growth has slowed nearly to a standstill, CBO believes that the economy will narrowly avoid recession and recover gradually next year.”
In an interview on NBC’s Today program Tuesday, OMB director Mitch Daniels said his budget forecasters projected that all excess Social Security funds this year would be used to reduce the national debt and not for current spending. “The real issue here is the economy and whether we can keep it going — that ought to be our objective,” he argued.
Daniels added, “the surplus started bigger than it has any right to be. Beyond some point the government really doesn’t have a right to take billions more from the taxpayers than it needs to pay its bills.... It’s the economy that produces surpluses, not vice versa.”
Making sense of the budget forecasts
Until the last three years, it was the usual procedure for the government under both Republican and Democratic presidents to borrow excess Social Security funds to pay for other programs.
Democrats and Republicans alike have vowed that they would create a “lockbox” and “wall off” Social Security revenues.
Social Security, designed to be a pay-as-you-go system in which current revenues equal the cost of the benefits paid to current retirees, now has more money coming in than it needs to pay for benefits.
Last year Social Security collected $84.9 billion more in revenues than it needed.
Borrowing the Social Security money has no practical impact on the program, although it prevents the government from paying down public debt as quickly as it otherwise would.
‘FISCAL STRAIGHTJACKET’
Bush argued last week that the dwindling federal surplus will have a healthy effect because it will deter increases in federal spending.
The president called the smaller surplus “a fiscal straightjacket for Congress. And that’s good for the taxpayers, and it’s incredibly positive news if you’re worried about a federal government that has been growing at a dramatic pace over the past eight years.”
The budget projections and the tax cut sparked a battle within the Democratic Party Monday with Georgia Sen. Zell Miller attacking Democratic National Committee chairman Terry McAuliffe.
“When he puts out statement after statement, TV ad after TV ad, railing against the tax cut, whom does he think he’s hurting?” asked Miller in a letter to the Washington Post. “Those moderate Democrats who voted for the tax cut, that’s who.”
Miller was one of the 12 Senate Democrats who voted for the tax cut. Twenty-eight House Democrats also voted for it.
Asked about Miller’s criticism, McAuliffe said: “We’re a big party with a big tent. I’m not spending my time talking about the tax cut, just fiscal mismanagement.”
Bush’s top economic adviser said Sunday that a recession might justify stimulating growth by using Social Security surplus funds, which most Democrats and Republicans in Congress have declared off-limits.
“If we had two quarters of negative economic growth, my recommendation to the president would be that he might consider it,” White House economic adviser Lawrence Lindsey said on “Fox News Sunday.”
“I don’t think we’re in a recession,” Lindsey stressed.
He appeared on Sunday morning television talk shows to flesh out Bush’s comments at a news conference Friday, in which he listed two types of “emergencies” that might warrant tapping into Social Security funds: “an economic recession or war.”
The Associated Press and Reuters contributed to this report. |
