Gannett News Service

Budget relies on Social Security

Recession, defense boost, tax cuts put Bush in a corner on revenue side

PETER G. GOSSELIN, LOS ANGELES TIMES

Originally published Tuesday, February 5, 2002

WASHINGTON -- In the budget he delivered Monday, President Bush relies on one source of new money more than any other to pay for his proposals: the trillions of dollars in Social Security funds being set aside for the start of the baby boomers' retirement.

Although Bush and his aides had warned that the war on terrorism and the need for homeland defense would require dipping into the Social Security surplus and running deficits for a few years, the dimensions of what the White House had in mind were not apparent until the unveiling of the $2.13 trillion spending plan for fiscal 2003. The measure took the breath away from some Democrats and independent analysts.

"The president is requiring the use of Social Security to pay for the normal operations of government," said Robert D. Reischauer, president of the nonpartisan Urban Institute and a Washington budget veteran. "That's the most significant, and largely unrecognized, change he's making."

Citigroup vice chairman and former Clinton administration Treasury secretary Robert Rubin said: "This country is ill-served by abandoning fiscal discipline, and this (budget) abandons fiscal discipline. It's the opposite of what was accomplished in the 1990s."

To be sure, that opinion was not universally shared, and no one claimed there was any danger to current retirees' benefits. Former Sen. Daniel P. Moynihan, D-N.Y., who co-chaired a recent commission on Social Security for Bush, said, "My own view is that this is a war budget. This is a national emergency and the president is responding."

Still, many analysts expressed surprise, both at the extent of deficits in the new Bush budget and its extensive use of Social Security money to cover them. What most surprised them:

-Far from running only a few years of deficits, the new budget assumes that the government's so-called "on-budget" spending, which covers everything from maintaining a military to subsidizing Amtrak, will run $150 billion or more in the red each year for the next decade, according to documents and White House officials.

-Instead of covering the bulk of the costs with expanding income-tax revenues that can be expected with the resumption of economic growth, the plan relies heavily on Social Security money to nudge the overall budget -- which includes on- and off-budget spending, such as payments to retirees -- into the black by 2005.

-Although Bush argues that the chief reason the nation must run in the red is to pursue the war on terror, his budget calls for new tax cuts -- over and above the 10-year, $1.3 trillion package approved last year -- equal to or greater than the new defense spending he seeks. The plan includes $590 billion in added tax cuts over 10 years, but only $550 billion in new defense spending.

"Everybody concedes that deficit spending, if it is in response to an emergency like Sept. 11, is not a bad thing," said Robert Bixby, executive director of the anti-deficit Concord Coalition. "But what's astounding is that this goes way beyond what was (once) a strong political consensus to save the Social Security surpluses."

In fact, before the September attacks, the president was at the center of that consensus. In an address to a joint session of Congress a year ago, he declared that "to make sure the retirement savings of America's seniors are not diverted in any other program, my budget protects all ... of the Social Security surplus for Social Security, and for Social Security alone." His pledge was considered critical to winning congressional passage of his $1.3 trillion tax cut.

But Bush and his aides appear to have decided that they cannot pursue their new military and homeland defense goals, protect the president's already approved tax cuts and maintain the Social Security surplus.

In part, that's because there is no immediate danger to retirees' checks. The system expects to collect more than $700 billion in revenues this fiscal year and pay out only about $470 billion in benefits. But analysts warn that failure to keep running surpluses and paying off federal debt will leave the country in a painful bind as baby boomers retire in growing numbers, and it will burden the smaller generation of workers that follows with rising Social Security tax costs.

The Olympian Copyright 2002

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