Bleeding Social Security

With five weeks to go until congressional elections, the House has hustled through a tax cut package worth $80 billion over the next five years and $177 billion over the next decade. Gainers would include many two-income couples, small savers, owners of family businesses and individuals facing large estate taxes. Proponents insist the cuts would be fiscally painless to the Treasury, since they would be paid for out of the enormous budget surpluses the Congressional Budget Office projects for the next 10 years. The problem is that those surpluses are pretty much a bookkeeping sham, as everyone in Congress knows. That’s one reason why the Senate is likely to reject any new tax cuts.

The budget office has told Congress that between now and the end of 2008 the so-called unified budget surplus--which counts ordinary revenues along with payroll taxes that are in excess of Social Security’s annual outlays--could total close to $1.6 trillion. That is big bucks indeed, and tax cut advocates sound reasonable when they argue that their plan would consume little more than 10% of the projected surplus.

But in fact, as the budget office makes clear, the surplus consists almost entirely of Social Security payroll taxes. Take away those revenues and federal budgets over the next five years are expected to show deficits totaling $137 billion. Pretty clearly Social Security won’t be “saved”--as Democrats and Republicans alike swear they are committed to doing--by creaming off a large part of its revenues to finance tax cuts.

Social Security’s trust fund is the reserve that will help keep the system solvent once huge numbers of baby boomers start retiring around 2009. Next year is supposed to see a bipartisan effort to produce a plan that will keep Social Security healthy through that looming demographic challenge. President Clinton says he insists on reserving “the entire surplus until we . . . save Social Security,” but in fact he is ready to take about $13 billion from the surplus to pay for operations in Bosnia, disaster relief and other contingencies.

These might all be worthwhile; so are tax cuts. But the politicians can’t have it both ways. Either the projected Social Security surplus will be used only for its intended purpose or it bodes to become fair game for every pet project or unforeseen expenditure. Most Americans, the polls make clear, wisely prefer safeguarding Social Security well into the next century over tax cuts now.