NATION : Treasury Chief Calls Moynihan’s Payroll Tax Cut Proposal ‘Goofy’

Treasury Secretary Nicholas F. Brady dismissed as “goofy” today a Democratic proposal to cut Social Security taxes, but agreed it has raised a valid point about the true size of the federal budget deficit.

Selling the tax and savings provisions of President Bush’s day-old fiscal 1991 budget during an interview on the CBS “This Morning” show, Brady suggested that the Social Security tax cut would mark a retreat from earlier work to ensure the long-term solvency of the retirement system.

After a bipartisan accord in 1983 “removed the idea from all Americans’ minds” that the system might someday go broke, Brady said, it would be “the height of folly” to repeal the mechanism devised to ensure future benefits will be paid.

The target of his criticism was a politically charged idea by Sen. Daniel Patrick Moynihan (D-N.Y.) to roll back payroll tax increases now generating reserves to pay the benefits of baby boom generation retirees beginning around 2010. At the heart of the plan is what to some had been an overlooked reality: that surpluses from the Social Security tax are not being placed in an account for safe keeping, but are being lent to the Treasury to help cover the deficit.

Brady asserted that Moynihan “has mixed up” two different issues: the actuarial soundness of the Social Security system and the way the Social Security tax surplus is used to show a lower deficit.