Posted on: Thursday, August 16, 2001

Social Security surplus disputed

USA Today

WASHINGTON — Despite their ardent pledges to place surplus Social Security money in a "lock box," President Bush and Congress have already picked the lock, according to congressional sources.

The Congressional Budget Office is expected to release a revised budget surplus estimate Aug. 28 that indicates that Social Security reserves will be tapped for other government spending this fiscal year, which ends Sept. 30.

The White House budget office soon will produce its own surplus estimate that shows reserves for Social Security untouched — but only because of a change in long-standing accounting methods that the administration says make surplus data more accurate.

This fiscal year, Social Security is expected to take in $156 billion more in taxes than it pays out in benefits. Politicians in both parties have pledged to use that money only to pay future retirees or to reduce the national debt.

That promise seemed easy to keep seven months ago, when CBO estimated that the government would have $125 billion in surpluses this year on top of Social Security reserves.

But that cushion has quickly flattened. About $74 billion went to the tax cut Bush signed into law in June. An additional $30 billion to $40 billion in expected tax revenue was devoured by the economic slowdown, says William Hoagland, director of the Senate Budget Committee's Republican staff. The rest went to increased government spending.

Hoagland said he expects the CBO will project that the government will tap at least $3 billion of the Social Security surplus this year, keep out of it in fiscal year 2002, and spend up to $15 billion of Social Security reserves in 2003 and again in 2004.

By contrast, the White House projection shows the Social Security surplus will remain off-limits for the next 10 years. But to keep from tapping that money, White House economists had to make accounting changes. Every summer, government accountants recalculate Social Security tax receipts from past years and reflect the changes in the current year's budget. But this time, that recalculation would reduce the size of the current surplus. So administration economists won't reflect past changes in the 2001 Social Security reserve, an administration official said.