- The Washington Times - Wednesday, August 22, 2001

Revised budget estimates to be released today will show that President Bush succeeded in his first goal as president: reduce federal revenues as much as politically feasible.
"That battle's over with. We cut the taxes," Mr. Bush told reporters after a speech yesterday in Independence, Mo.
"And Congress now needs to understand that there are some new parameters."
While Democrats and some Republicans six months ago were talking about spending increases adding to hundreds of billions of dollars over the next decade, just this weekend, House Minority Leader Richard A. Gephardt, Missouri Democrat, was talking about across-the-board spending cuts to stick to this spring's budget agreement for fiscal 2002.
Budget estimates to be released by the Office of Management and Budget (OMB) are expected to show that of a $281 billion surplus projected in January for fiscal 2001, just $150 billion to $160 billion will remain.
For fiscal 2002, OMB will likely project a reinvigorated economy and a concomitant increase in the projected surplus.
The Congressional Budget Office will release its budget re-estimate next week and will likely take a more pessimistic view of fiscal 2002.
The numbers will prompt accusations by Democrats that Republicans and the White House are "dipping into" Social Security and Medicare funds.
By way of explanation, Social Security is projected to generate about $155 billion in surpluses, and the hospital portion of Medicare is projected to generate another $30 billion in surplus.
In the common parlance of Washington, because the government's total surplus could be less than the surpluses generated by the two entitlement programs, the budget would be "dipping into" Social Security and Medicare.
"There is no question in my mind that Medicare is already being diverted and that we are headed into the Social Security trust fund," Sen. Robert C. Byrd, West Virginia Democrat, said yesterday.
Sen. Charles E. Grassley, Iowa Republican, countered that the Social Security and Medicare trust funds — which cannot keep cash and are therefore made up of special Treasury bonds — will be treated the same regardless of whether there is a general government surplus or deficit.
So when Congress and the White House talk about "protecting Social Security," what they are really debating is whether the surpluses borrowed by Treasury from the trust funds will be used to buy back publicly held bonds, or spent on other programs, such as highways, defense, health care and the like.
If OMB's projections are correct, about $150 billion in publicly held bonds will be redeemed before the Sept. 30 end of fiscal 2001.
Of the additional $130 billion in surpluses the CBO had estimated in January would be available in fiscal 2001, a tax cut passed by Congress and signed by Mr. Bush this spring consumed $70 billion, or slightly more if interest expenses are included.
A supplemental-spending bill consumed another $6.5 billion. The remainder simply failed to surface, a casualty of the economic slowdown.
Republicans say you have to start the clock earlier to understand what happened to the surplus. They note that government spending has increased by 20 percent over the last decade, even after adjusting for inflation.
Democrats counter that all of that decade-long increase is due to growth in entitlement programs and that the tax cuts are the reason for the problem in fiscal 2001 and fiscal 2002.
"This is where the real spending took place," Mr. Byrd said, brandishing a letter from the Internal Revenue Service telling him of his upcoming tax refund.

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