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Broad coalition urges caution in spending surplus: trust funds need careful attention.

"We need a federal budget full monte before we rush to spend a budget surplus we don't have;" Robert Greenstein, the Executive Director of the Center for Budget and Policy Priorities warned a packed press conference inside the U.S. Capitol last week. Greenstein made his warnings against a backdrop of charts demonstrating that it is the large, current surpluses in the Social Security Trust Fund that are helping to make it appear as if the federal budget is nearly balanced:

"The federal budget will not be balanced until trust fund surpluses are no longer used to cover the federal deficit and growing national debt."

Sen. Byron Dorgan (D-N.D.) invited NLC, Greenstein, and a crazy quilt of other organizations, including the American Association of Retired People, the Committee for Economic Development, the Cato Institute, the American Enterprise Institute, the Concord Coalition, and the Committee for a Responsible Federal Budget to join him at the special briefing to warn Congress and the President about:

* continued reliance on Social Security surpluses in calculating any federal budget surpluses;

* spending any projected federal surpluses before they even materialize; and

* ensuring that federal lawmakers address the longer term problems of Social Security and Medicare as a high priority.

Noting the great hoopla in Washington and feeding frenzy about how to spend as yet unrealized federal budget surpluses, Dorgan said he could never remember a time when he had been in the room with such a diverse group of interests. He recognized that each organization had very different interests, including the allocation of any eventual federal budget surpluses. But he noted that concerns about a commitment to the next generation and full and fair accounting with regard to federal spending and tax habits were the uniting factors.

In response to questions from the press, Dorgan noted that the efforts were aimed at getting the facts out, so citizens and voters could understand what was at stake.

Herb Stein, a senior fellow at the American Enterprise Institute and former Chairman of then-President Richard Nixon's Council of Economic Advisors, wrote:

"We should be candid about our choices here. Those who want to eliminate or substantially reduce our prospective small surpluses should admit that in so doing they are impairing the incomes of our children and grandchildren. They should not act as if there was some excess income that could be given away without hurting anyone. To prefer our generation over future generations is not immoral, although that is not the choice I would make. But to talk and act as if we were not making a choice between the present and the future -- that is irresponsible."

Under the balanced budget act President Clinton signed last fall, the federal budget is projected to reach a balanced budget by the first year of the new century. That budget would assume what is termed a "unified federal budget," or a budget counting surpluses in federal trust funds to offset deficits in the operating budget. Without using the funds theoretically set aside in the Social Security Trust Fund to meet future retirement needs, the federal budget for next year would actually show a deficit of dose to $104 billion.

President Clinton has stated that the budget for 1999 that he submits to Congress early next month would provide for a balanced "unified" federal budget for next year. The Presidents budget would assume gradually increasing, but small surpluses over the next decade before the massive baby boom retirees begin to draw down and exhaust both the Social Security and Medicare federal trust funds. It is that major demographic change which threatens to drastically escalate the federal deficit m about 30 years -- at a time when there would be far fewer workers to support a far larger pool of retired Americans.

The battle over how to balance the federal budget seems largely over -- at least temporarily, in Washington, D.C. But what to do with a "unified" surplus is front and center on the agenda. Whether to begin to pay down the nation's accumulated national debt of some $4 trillion, to provide new tax breaks to some Americans, or whether to increase spending are the three major choices. What to do about the looming Social Security and Medicare bankruptcies seems to present choices that many would rather put off to another day.
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Title Annotation:recommendations from the Center for Budget and Policy Priorities
Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:Jan 26, 1998
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