| Surplus Goes 'Shrink-to-Fit' | |
|
Dateline: 08/28/01
Blaming the gloomy economy and President Bush's tax cuts, the Congressional Budget Office (CBO) today released figures showing that at least $9 billion from the Social Security surplus must be spent in order to fund government programs in the yet to be debated fiscal year 2002 federal budget.
At issue here is the total size of the federal budget surplus in the bank on September 30, the end of the federal government's fiscal year for 2001.
Last week, the White House's Office of Management and Budget (OMB) projected a surplus of $158 billion would exist at the end of fiscal 2001. This figure, said OMB, while significantly smaller than $281 billion surplus it had projected in April, would protect the Social Security surplus fund.
Today's Congressional Budget Office figures project a surplus of only $153 billion, requiring, according to CBO, some $9 billion to be taken from the Social Security surplus fund this year, coupled with withdrawals from the Social Security retirement fund in fiscal years 2003 and 2004.
NOTE: Expenditures from the Social Security surplus fund will not affect current Social Security benefit payments.
The discrepancy in the long-term outlook can be explained by the fact that CBO and OMB differ in their opinions of how quickly the sagging U.S. economy will snap back. The White House -- OMB -- figures use an economic growth rate of 3.2 percent for next year, a figure that would pump far more money into the surplus than the 2.6 percent economic growth rate used by the Congressional Budget Office.
Both the CBO and the White House, however, project an average yearly annual economic growth rate of around 3.2 percent through the end of the decade.
Politically, Democrats blame President Bush's tax cut program for the shrinking surplus, while the White House counters that tax cuts are the driving force needed to stimulate the American economy, thus growing the surplus.
Even more politically, the widely differing "shrink-to-fit" OMB and CBO surplus figures and the reasons for them will add much fuel to the fires of upcoming budget debates in Congress. When lawmakers return to work after Labor Day, they will have less than a month to complete all 13 of the annual spending bills making up a fiscal year 2002 federal budget expected to exceed $2 trillion.
• The CBO report, The Budget and Economic Outlook: An Update
, can be read online at:http://www.cbo.gov/showdoc.cfm?index=3019&sequence=0&from=7
In summarizing their budget report, CBO states, "For the five years from 2002 through 2006, CBO projects surpluses totaling $1.1 trillion, which come almost entirely from off-budget accounts. For the 10-year period through 2011, CBO estimates that under current policies, surpluses will total $3.4 trillion. Social Security makes up about three-quarters of that total. In 2010, the on-budget surplus reaches 1 percent of GDP, and the total surplus grows to 3 percent of GDP. Those estimates should be viewed cautiously, however, because future economic developments, technical estimating errors, and future legislative actions could produce substantial deviations."
Who are the budget estimators?
Office of Management and Budget (OMB)
works for the President of the United States. OMB's top job is helping and
advising the president in preparing the annual federal budget and overseeing the
administration of the budget by the Executive Branch agencies. Mitchell E.
Daniels, Jr. is the current Director of the OMB. Officers of the OMB are
appointed by the president, confirmed by the Senate and continue to serve at the
pleasure of the president.
Congressional Budget Office (CBO) is a non-partisan (not affiliated with any political party) agency created in 1975 to assist and advise Congress with its role in the federal budget process. Dan L. Crippen is the current Director of the CBO; his term of office ends in January 2003. The Speaker of the House and President pro tempore of the Senate jointly appoint the CBO Director, based on recommendations from the House and Senate budget committees. The director's term is four years with no limit on number of terms served. Either chamber of Congress may remove the director by resolution.
