Smoke, Mirrors and Red Ink

President Clinton is quick to take credit for the fiscal discipline that Washington has exercised in wiping out deficit spending for the second year in a row. “We can say the era of big deficits is over,” he declared Wednesday in announcing a revised estimate of the budget surplus for fiscal 1999. Not quite, Mr. President.

This much heralded budget “surplus,” now put at $76 billion, is a bookkeeping myth. As we have previously noted, 1998’s $70-billion surplus was calculated using$99 billion from excess payroll taxes in the Social Security trust fund. Exclude those Social Security funds and the federal budget would have been $29 billion in the red.

Since nothing has changed that would require eliminating the Social Security trust fund’s surpluses from budget calculations, the projected surplus for fiscal 1999, which ends Sept. 30, still includes them and the resulting fiscal illusion continues to obscure problems.

The surplus, phantom though it is, has renewed calls for tax cuts by Republican leaders including Senate Finance Committee Chairman William V. Roth Jr. and House Majority Leader Dick Armey. These are false hopes and political chicanery. It’s far too soon to consider tax relief. Deficits will continue to loom unless Social Security, Medicare and Medicaid are reformed to accommodate the coming retirements of baby boomers and their drain on the Social Security trust fund.

So far there’s little but talk on meeting the problem. This is the year for action on Social Security financing. Without reform, we’ll be seeing red again in Washington, big time.