Sen. Pete Domenici, R-N.M.
Dip into Social Security, says
GOP senator
Budget talks take surprising turn
MSNBC STAFF AND WIRE REPORTS
WASHINGTON, Sept. 6 — In a break with President Bush, the top Republican on the Senate Budget Committee suggested Thursday that Congress should dip into Social Security surpluses to meet the nation’s education and defense needs without running into a budget squeeze.
‘The real fiction is to talk about surpluses because that leads the American people people to conclude that there is extra money.’
— SEN. KENT CONRAD
Senate Budget Committee chairman DEFYING THE prevailing position of both Republicans and Democrats, Sen. Pete Domenici of New Mexico said it did not make sense to put the Social Security surplus strictly off limits, or to apply the brakes on government spending during an economic downturn.
“I have now talked to at least 15 economists and none of them, none of them, believe that it is good policy to say that we cannot touch those (Social Security surpluses) in an era of declining growth,” Domenici said.
“What’s wrong with looking at it for education if you need education now? What’s wrong with looking at it if you need defense now?” he said at a committee hearing with White House budget director Mitchell Daniels.
The White House stuck with its earlier position, contending there was enough money to boost defense and education even with the sharply lower surplus projections brought on by Bush’s $1.35 trillion 10-year tax cuts and the flagging economy.
“I have repeatedly said the only time to use Social Security money is in times of war, times of recession or times of severe emergency. And I mean that,” Bush told reporters.
“There is ample money coming into our government to fund our priorities, and what we need is fiscal discipline in Washington, D.C.,” he said.
‘THIS IS A MORAL ISSUE’
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But while saying the White House would only use Social Security surpluses to pay off debt, Daniels rejected Democrats’ arguments that diverting the revenues to other federal programs hurts the retirement program.
He argued that talk of “raids” on Social Security when surpluses were used for other programs instilled false fears that retirement benefits could be jeopardized.
Social Security revenues for years were used to help fund other programs. But once the government started posting surpluses, both parties made a political mantra out of dedicating surpluses from the retirement system to paying down the national debt, which most lawmakers said would better prepare the system for retiring baby boomers.
“This is more than just an accounting issue. This is a moral issue, this is an issue having do with our credibility,” said Senate Majority Leader Tom Daschle, D-S.D.
“Now the first test that comes along we’re being challenged and of course there are those would who rationalize how easy it would be to go back to the old ways,” he told reporters.
MISSILE DEFENSE FUNDING QUESTIONED
Earlier Thursday, Senate Democratic leaders urged Bush to submit a revised budget blueprint to Congress, detailing where he would cut spending. Daschle indicated the Democrats would try to slash funding for development of a missile defense system, but said it was the president’s job to figure out where other spending cuts should be made.
Shortly after Daschle spoke, Defense Secretary Donald Rumsfeld told reporters it would dangerous for Congress to cut the Pentagon’s $8.3 billion request for missile defense funds in fiscal year 2002, which begins on Oct. 1.
Democrats on the Senate Armed Services Committee plan to cut $1.3 billion from the Pentagon’s missile defense request. “If you take $1.3 billion out of some portion of it, it’s big,” Rumsfeld said. “As a percentage, it’s enormous, it’s very harmful.”
Speaking at a Pentagon news conference, Rumsfeld expressed confidence that once the Senate and House complete work on the defense budget they will give the administration the full $329 billion it has requested.
“I have every confidence that we’ll end up with our budget,” Rumsfeld said. “The truth is, we do need every nickel.”
Democrats are ratcheting up pressure on Bush to explain how he’ll pay for more spending on education and the military. They also want him to accept their contention that the $1.35 billion tax cut that Congress passed in May and Bush signed into law was fiscally imprudent, which he is unlikely to do.
“Most of us didn’t vote for the tax cut, most of us didn’t vote for the budget, so we’re living under these conditions stipulated by our Republican colleagues and by the administration,” Daschle told reporters Thursday. “Now what we want is some leadership” from Bush, he said.
Daschle and 32 other Senate Democrats voted against the tax cut, while 12 voted for it. The tax cut would not have passed without those Democratic votes.
IS THERE A SURPLUS?
Meanwhile, at a contentious hearing of the Senate Budget Committee, senators and Daniels could not even agree on whether there is a budget surplus.
What is the capital gains tax?
When taxpayers sell stocks, real estate, collectibles and other assets, they must pay capital gains tax on the difference between the price at which they acquired the asset and the price at which they sold it. Under current law, there is a maximum tax of 20 percent on capital gains from assets held for at least a year. The capital gains tax raised about $118 billion in revenue last year, which was about 12 percent of the total individual income tax receipts for the federal government.
Sources: Congressional Budget Office, Congressional Research Service
“Talking about surpluses here is totally misleading to the American public,” contended Sen. Kent Conrad, D-N.D., chairman of the Budget Committee. “The real fiction is to talk about surpluses because that leads the American people people to conclude that there is extra money, there is money for more spending, more money for more tax cuts and the truth is those surpluses are all committed to keeping promises that have already been made.”
But Daniels said, “if we are wrong to call it a surplus, then we have been wrong for all of American history until the last couple of years. No one else outside of Washington has any trouble identifying the correct term to apply to a situation where revenues exceed all expenditures by hundreds of billions of dollars.”
Social Security's Future
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• Learn more about Social Security and the problems the system faces.
The Congressional Budget Office estimated last week that the total budget surplus in fiscal year 2001 will be $153 billion, almost all of which, it said, would come from Social Security tax revenues.
The CBO predicts that the government will need to borrow some $9 billion of excess Social Security funds to help pay for other programs in the fiscal year ending Sept. 30.
Daniels disputed that prediction at Thursday’s Budget Committee hearing. By staying within the Bush budget framework, Daniels said, “We can honor all the commitments, including that common commitment to set aside and use for debt reduction the surplus attributable to (Social Security) payroll taxes.”
Dipping into the Social Security surplus?
The Social Security system been running large surpluses partly because the payroll tax rate has been increased by 15 percent since 1984. Workers paid $492.5 billion in payroll taxes last year, but Social Security only needed $407.6 billion to pay benefits to retirees. The difference, nearly $85 billion, was excess, or surplus. |
