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.

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 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.

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