- The Washington Times - Friday, August 17, 2001

The Bush administration will argue in a revision of the federal budget surplus that a simple accounting change has produced an unexpected $4.3 billion this year for additional spending or tax cuts.
Administration officials say the money found in Social Security accounts leaves the Social Security Trust Fund sacrosanct.
The budget "will fully protect Social Security while leaving a small surplus in the operating accounts," White House spokesman Ari Fleischer said yesterday.
Democrats said the accounting maneuver may avert an immediate invasion of the Social Security trust fund, but shows that the tax cut is too large, removing any room for error in budget projections if other spending priorities such as education and defense are met.
Seeking to heighten the budget pressure on the president, Democrats, including Senate Majority Leader Tom Daschle of South Dakota and House Minority Leader Richard A. Gephardt of Missouri, sent Mr. Bush a letter on Wednesday claiming the coming budget revisions will clearly demonstrate the threats to Social Security and Medicare.
"We face the very real prospect that your tax cut, coupled with an economy that is slowing significantly, will have exhausted all of the surplus in the near term and leave no way to fund other functions of government without tapping into Medicare and Social Security," the Democrats wrote.
Administration officials said the accounting changes involve properly crediting to Social Security the payroll tax revenues for 1998, 1999 and 2000, which effectively reduces the trust fund's surplus in 2001 by $5.6 billion. The changes will be included in next week's release of the White House Office of Management and Budget new budget outlook for 2001.
The administration is making one other change involving the U.S. Postal Service, which usually is lumped in with Social Security for budget purposes. The change would separate the Postal Service account, which is running a $1.3 billion deficit this year. That would have to be made up out of the spending side of the ledger.
Combining the two changes would result in a fiscal 2001 surplus, excluding Social Security, that is $4.3 billion larger than it would have been otherwise. It also makes the Social Security surplus appear smaller than it would have been.
Democrats described the maneuver as an unprecedented accounting gimmick designed to mask the near-term impact of Mr. Bush's tax cut on the budget.
"Obviously, they're scratching around," said John Podesta, White House chief of staff under President Clinton. "They need money for their priorities."
Mr. Fleischer said the OMB report will show the impact of the $38 billion in tax cut checks and project a U.S. economic growth rate of 3.2 percent next year. "The OMB growth projections are going to be exactly in line with the private sector's," he said. "The private sector is as low as 0.5 [percent growth] up to 4.0. Our number is actually going to be 3.2 percent growth for '02."
The White House has argued that a weak economy and congressional overspending are the bigger threats to a sound budget.
The Congressional Budget Office, which produces the budget estimates Congress must live by, also is expected to issue new projections before the end of August. The first stages of the recently enacted 10-year, $1.35 trillion tax cut and slower economy could send CBO's forecast in May of a $275 billion surplus, including Social Security, to roughly $160 billion.
From Combined Dispatches


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