Raid on Budget Surplus Ups Social Security Fears

Republicans said they wouldn’t touch it except to pay for a broad tax cut. President Clinton and congressional Democrats said they would dedicate it all to saving Social Security.

But the projected $70-billion federal budget surplus proved irresistible.

In the end, negotiators from both sides designated $20 billion of it to help close the deal on a mammoth spending bill to finance government operations, emergency disaster relief and billions of dollars in lawmakers’ pet projects.

The raid--agreed to this week behind closed doors--raises questions about whether Congress and the White House will leave the rest of the surplus alone until they decide how to preserve the long-term solvency of the Social Security Trust Fund.

“It calls seriously into question our ability to look even medium-term when we know we’re facing a very serious set of challenges,” added Carol Cox Wait, head of the nonpartisan budget monitoring group Committee for a Responsible Federal Budget.

With Republicans promising to enact next year what House Speaker Newt Gingrich (R-Ga.) described Wednesday night as “a large and healthy tax cut bill,” a spokesman for a seniors’ organization expressed concern that tax-cut advocates again may turn a covetous eye toward the growing surplus.

“The outlook is very frightening,” said Patrick Burns of the National Council of Senior Citizens, an advocacy group with half a million members. “What we are seeing is a fundamental flaw in Washington, which is the tendency to spend money before we get it. It’s plain old-fashioned political pandering.”

And no one should be surprised, according to University of Virginia political scientist Larry Sabato. “Was there a citizen in the United States who believed that the president and Congress would keep their hands off the surplus? The mix of money and politicians is volatile, and the chemical reaction almost always results in the spending of money.”

Thomas Mann, director of government studies at the Brookings Institution, agreed. But, he said, the damage could have been worse than $20 billion.

The surplus was “just too great a political attraction to expect that politicians will walk the straight and narrow here,” Mann said.

The $500-billion omnibus spending bill for fiscal 1999 includes $9.7 billion for military readiness and a national missile defense system, $18 billion for the International Monetary Fund and $6 billion in emergency disaster relief for the nation’s farmers.

Also buried deep in the massive measure are numerous pork-barrel projects inserted by individual lawmakers for constituents back home.

These include $250,000 that an Illinois research firm will get to look into caffeinated chewing gum, $2 million for a storm shelter in Florida, $750,000 for grasshopper research in Alaska and $1 million for “peanut quality” research in Georgia.

“Many members will come out of this process as winners with spending for their own special interest projects,” said Sen. John McCain (R-Ariz.), a longtime critic of such practices. “Unfortunately, the losers are the American taxpayers who will have to shoulder this fiscal burden.”

Both President Clinton and lawmakers on Thursday tried to put their own favorable interpretations on dipping into the budget surplus.

“We did save the surplus for the hard work of Social Security reform next year,” Clinton insisted during a South Lawn ceremony.

Senior White House advisor Paul Begala said that surplus spending was allowable under budget rules that permit extra spending for emergencies.

“I’m very comfortable in our argument that back in January the president pledged to save every penny of the surplus until he saved Social Security and he’s done so,” Begala said.

He also noted that the White House blocked Republicans from enacting a broad tax cut that would have “squandered” the surplus.

On Capitol Hill, House Majority Leader Dick Armey (R-Texas) maintained: “This is still the Surplus Congress. . . . Mr. and Mrs. America, for the most part, your surplus is still intact.”

Congressional Republicans, including Senate Majority Leader Trent Lott (R-Miss.) and Gingrich said that even more of the surplus would have been spent if Clinton had gotten his way.

As it is, Lott said, “I’m unhappy with that [$20 billion] amount.”

The surplus spending upset many fiscal conservatives as well as seniors’ organizations.

“I’m very pleased that we’re on the right plane toward true deficit termination,” said former Sen. Warren B. Rudman (R-N.H.), a longtime deficit hawk.

“However, if we are going to continue to take parts of the surplus and spend it, we’ll be in the worst situation we could be in,” he said. “The bottom line is this money shouldn’t be spent. It should be used to pay off the debt and then put in a segregated fund to save and improve the chances of a prosperous Social Security Trust Fund.”

Analysts said that the fund is projected to run a deficit for the first time in 2013 because of the wave of baby boomers reaching retirement age. Projections would have the fund reaching insolvency by 2032, unless major reforms are enacted.

Some lawmakers on Thursday pointed out that the one-year, $20-billion spending from the surplus would go for disaster relief and other emergency spending, including peacekeeping in Bosnia. But a spokesman for the Concord Coalition, which promotes fiscal responsibility, was not mollified.

“You know there’s going to be emergencies and disasters. It happens every year. You shouldn’t be surprised. So maybe we should just plan for that in the budget instead of creating this emergency spending, which can be abused,” said Craig Cheslog, a coalition spokesman.

Sabato said that the lesson of the surplus raid is clear.

“This gives voters a powerful argument for insisting that congressmen and -women either turn the surplus over entirely to Social Security or give it back to the people in tax cuts, or some combination of both,” he said. “If they don’t, it will be frittered away in no time.”

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Times staff writers Janet Hook and Elizabeth Shogren contributed to this story.

* MEDICINE: Congress set to OK birth control coverage. A18