The mantra being used by all sides in this year's debate is a mouthful: "Our-budget-doesn't-touch-the-Social-Security-surplus-and-reduces-the-federal-debt."
President Clinton has gone to great strides to lay claim to the debt reduction issue, including calling a press conference at the White House on the same day in late January that a snowstorm shut down the rest of the nation's capital. It was also his budget last year that many say started the race to see who would not touch the Social Security trust fund surplus.
Meanwhile, Republicans in Congress have worked at least as hard to adopt the compound budget incantation as their own. For example, it was a prominent part of rhetoric used by Republican representatives when the House passed its version of the fiscal 2001 budget resolution in March, and was frequently repeated by the Senate Republican leadership as the most important feature of the resolution they passed last week.
The truth, however, is that the two issues are one and the same. A budget that says that the overall surplus should be no less than the Social Security surplus (no one would actually be "spending" or "dipping into" Social Security) automatically means that the trust fund surplus will be used to reduce publicly held federal debt.
If your budget has the first policy, there is no way to avoid having the second.
A few numbers may be instructive here. The "real growth" baseline published earlier this year by the Congressional Budget Office, which assumes that all appropriations will grow by the rate of inflation, projected a total fiscal 2001 surplus of $177 billion. About $166 billion of this was the "off-budget," or Social Security trust fund, surplus.
If the policy is what the administration and Congress keep saying it should be-that the overall budget surplus should be at least $166 billion so that it appears the Social Security trust fund is not being spent-then the federal government will take in at least $166 billion more in revenues than it will spend. Regardless of the source of the excess revenues, the federal government will be able to reduce its debt by this amount.
Between 2001 and 2010, the baseline projects a total surplus of about $3.2 trillion-$2.3 trillion from the Social Security trust fund, and an on-budget surplus of around $840 billion. Therefore, the fiscal policy of having the total surplus be no less than the Social Security surplus means that, regardless of whatever else is done on the budget, publicly held federal debt would be reduced by almost two-thirds over this ten-year period, from $3.6 trillion to $1.3 trillion.
The fact that both of these things will happen because of the budget policies being adopted is not in dispute; the computation being used by all sides in the debate will produce the result everyone is claiming. A surplus of any kind-on-budget, off-budget, or total-will result in excess revenues that, if not used to cut taxes or increase spending, will reduce the publicly held debt.
The real question is which of the two is the actual policy, and which is the by-product? If an overall budget surplus at least equal to the Social Security surplus is the goal, then reducing the debt is little more than an opportune calculation. If reducing the debt is the plan, then having a surplus equal to the Social Security surplus is merely one way to accomplish it.
Knowing which of these came first would be extremely helpful in figuring out what this year's debate means for the future. If debt reduction is the primary motivating factor, then not spending some of the on-budget surplus would also seem possible or desirable. If "saving Social Security" is the foremost goal, then the on-budget surplus should be fair game for tax cutters and spending increasers alike.
In the meantime, we are all left wondering which came first.
Question Of The Week
Last Week's Question. No one wins an "I Won A 2000 Budget Battle" T-shirt this week. The judges decided that a secret codicil (Any "Animal House" fans out there?) applied because the responses were . . . well . . . not particularly appropriate or good. Sorry.
This Week's Question. "Horton Hears An Outlay," "Babar The Revenue" and "The Little Budget That Could." If there were a children's book about the federal budget, what would it be called? Send your response to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, April 15 and you could win an "I Won A 2000 Budget Battle" T-shirt to wear while reading the fiscal 2001 congressional budget resolution to lull your own Rugrats to sleep.
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