Opinion Editorial | |
| Monday, November 23, 1998 | |
Taking Social Security Off Budget |
Speaker of the House-designate Bob Livingston (R-La.) has said that his first priority in the new Congress will be to remove Social Security from the budget. "Under the new budget rules, we will no longer use Social Security proceeds to mask the budget deficit," he said. At the same time, however, Livingston also promised that he will push hard for tax cuts next year as well. "We need tax cuts and we're going to deliver them," he vowed. Unfortunately, these two proposals are in conflict. In the end, he may have to choose which goal is more important. The problem arises from the fact that revenues from Social Security payroll taxes are now greater than current Social Security expenditures. Hence, Social Security is running a large surplus when viewed in isolation. According to Social Security's board of trustees, next year Social Security's retirement and disability programs will run a cash surplus of $54 billion. In addition, the Social Security trust fund receives interest on Treasury securities held by the fund. Including interest on these assets raises the surplus to $107 billion in 1999. Social Security also includes the Medicare program which is financed by a separate tax. At present, this tax does not cover all Medicare expenses, leaving a cash deficit. Next year it is expected that Medicare will pay out $13 billion more than it takes in. Including Medicare in the Social Security calculation, therefore, lowers the cash surplus to $41 billion in 1999. It is not known which measure of the Social Security surplus Livingston wishes to take off-budget. It matters because the broadest definition of the surplus uses up more than 100 percent of the total federal budget surplus for many years to come. This means that further spending cuts will be necessary just to balance the budget, (see figure) making the prospect of tax cuts very remote indeed. Even the narrowest measure of the Social Security surplus uses up most of the projected surpluses in the total budget, leaving very little for tax cuts. Livingston may hope that by, in effect, reducing overall surpluses by taking Social Security off-budget Congress may be forced to cut spending if it wants to cut taxes. This would certainly be a welcome change from the orgy of pork-barrel spending that characterized the last session of Congress. However, given that budget rules prevent using cuts in annual appropriations to pay for tax cuts, this strategy may not work. Congress should think carefully about Livingston's plan before voting, lest it lock itself into a budget strategy it may not want. Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, November 23, 1998. Home | Support Us | All Issues | Social Security Debate Central | Contact Us |
