October 30, 2014

BORROWING SOCIAL SECURITY SURPLUS FOR OTHER SPENDING ALLOWS CLAIM OF "BALANCED BUDGET" BY 1999

WASHINGTON -- The Concord Coalition today disputed claims that there will be a federal budget surplus by 1999, pointing out that the projected surplus is only reached by borrowing Social Security's annual surplus revenue to fund other government programs.

While today's projections from the Office of Management and Budget (OMB) predict a budget "surplus" of $9.5 billion by 1999 under the Clinton administration's latest budget plan, that surplus is possible only by borrowing Social Security's surplus of $105 billion in that year.

Without borrowing the Social Security surplus, OMB does not project that balance will be reached within the budget's five-year planning window. For the year 2003, the OMB projects that the government's "on-budget" operating accounts will be $63 billion in the red.

"The so-called budget surpluses that policy-makers are lining up to spend consist entirely of Social Security's annual trust fund surpluses," said Martha Phillips, executive director of the Concord Coalition. "We should be saving those surpluses to prepare for the retirement of the Baby Boomers, which will put a huge financial strain on future taxpayers."

Phillips also questioned several assumptions in the President's budget proposal. Among these are an assumed deal with the tobacco industry that the White House hopes will produce $65.5 billion in increased federal revenue over the next five years, and tax loophole closings that will garner $23 billion.

Phillips said the OMB's projection of budget surpluses "as far as the eye can see" also includes assumptions that depend on the economy remaining robust, and the president and Congress exercising fiscal restraint. The Congressional Budget Office has pointed out that if Congress spends projected surpluses on new programs or tax cuts, the long-term budget outlook will become much more pessimistic.

"Any combination of slower economic growth, increased federal spending or tax cuts could lead to deficits as far as the eye can see," Phillips said.

 

BUDGET PROJECTIONS OF THE OFFICE OF MANAGEMENT AND BUDGET (OMB)
(in billions of dollars)

 

OMB Projection: Budget Deficit
Without Borrowing Social Security Trust Fund
1998 1999 2000 2001 2002 2003
-106.3 -95.7 -104.9 -94.1 -44.6 -62.8
Projected Annual Social Security Surplus
1998 1999 2000 2001 2002 2003
96.3 105.3 113.5 122.3 134.4 145.5
OMB Projection: Budget Deficit/Surplus After
Borrowing Social Security Trust Fund
1998 1999 2000 2001 2002 2003
-9.9 9.5 8.5 28.2 89.7 82.8

BUDGET FACTS:

 

  • A Presidential Commission headed by Alan Greenspan recommended in 1982 that payroll taxes be increased in order to partially pre-fund the retirement of the Baby Boomers, the largest generation in American history. But rather than saving the surpluses to prepare for the massive demographic shift, Congress has borrowed them ever since for other government programs and to make the federal deficit appear smaller.

     

  • Since 1983, $647 billion has been borrowed from Social Security's trust fund to lower the size of annual U.S. budget deficits. Money borrowed from the trust fund will have to be paid back through tax increases or benefit cuts once the Boomers start collecting their Social Security retirement checks.

     

  • While the Social Security system is running annual surpluses today, it will begin running growing annual deficits around 2012.