GOP Draws Up Budget, Minus Social Security

Republican leaders in Congress agreed Thursday to the broad outlines of a federal budget that would end the use of Social Security revenues to operate other government programs, increase defense spending and provide only a small tax cut next year.

The agreement in principle, which would have to be fleshed out in legislation in coming weeks and months, is designed to allow Republicans to propose a tax cut without being accused of raiding Social Security to finance it.

It represents the Republicans’ opening gambit in a yearlong chess game over how to use the government’s burgeoning budget surpluses.

President Clinton has proposed reserving 62% of the surpluses over the next 15 years for Social Security and using the rest to boost spending for Medicare, defense and other programs.

Republicans had offered a hodgepodge of competing proposals aimed at two general goals: cutting taxes and safeguarding Social Security. The agreement among GOP leaders--a small, elite group--does not settle all those intraparty disputes, but it significantly narrows the options.

Sticking With ’97 Spending Caps

By barring the use of Social Security funds for tax cuts and spending increases, the leadership agreement substantially reduces the chances of a big, across-the-board tax cut or spending increases unaccompanied by offsetting cuts.

Further turning the screws on spending, GOP leaders insisted that they would stick with the government-wide spending caps set in the landmark 1997 budget-balancing plan. However, many Republicans predicted that demands for increased spending in defense and education will force Congress to exceed or circumvent those ceilings before the year is out.

Although GOP leaders cast their budget outline as a challenge to Clinton’s priorities, their rhetoric masked an important area of agreement: Republican leaders have adopted, even surpassed, Clinton’s demand that 62% of the budget surpluses be set aside for Social Security.

Democrats applauded that but want 15% more earmarked for shoring up Medicare. Republicans “are two-thirds of the way there,” said Senate Minority Leader Tom Daschle (D-S.D.). “We think Medicare and Social Security ought to be locked up.”

The GOP budget outline emerged from days of meetings by top Republican leaders, including House Speaker J. Dennis Hastert of Illinois, Senate Majority Leader Trent Lott of Mississippi, Senate Budget Committee Chairman Pete V. Domenici of New Mexico and House Budget Committee Chairman John R. Kasich of Ohio.

Their agreement still must be reviewed by the GOP rank and file and pushed through the House and Senate. But it is a major turning point because it represents a high-level GOP commitment to the unprecedented principle of mandating that Social Security revenues be used only for retirement benefits or for paying down the national debt.

Although that agreement would not ensure Social Security’s future indefinitely, it has major implications for the rest of the budget.

For one thing, it could quickly throw the balanced budget back into deficit.

Difference Between Surplus and Deficit

Social Security is the reason that last year’s budget was the first in three decades to run a surplus. While the Social Security payroll tax is bringing in more revenue than the program is paying out in benefits, the rest of the government is still running a deficit.

Even next year, the budget would run a $4-billion deficit without Social Security. With it, the budget runs a $137-billion surplus.

Putting Social Security off limits makes it much harder for Republicans to deliver their highly touted tax cuts. With no surplus in hand until 2001, any tax cut effective in 2000 would have to be small--certainly not the 10% income tax cut that many Republicans favor--so that it could be offset by spending cuts or tax increases in other areas.