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Dems, GOP clash over forecast for lower surplus

WASHINGTON (CNN) -- In the wake of a smaller estimate for the budget surplus, the Senate's top Democrat said Sunday that Republicans will have to dip into Medicare and Social Security funds to find the money for their spending priorities.

Republicans rejected that charge, but at least one conceded that difficult spending decisions lie ahead.

"I can tell you that at the end of the day, we're going to have to make some tough decisions," Sen. Richard Shelby, R-Alabama, said on CNN's Late Edition with Wolf Blitzer.

The president's top economic adviser, Larry Lindsey, said Friday the budget surplus for this year is expected to be about $56 billion short of previous estimates. He blamed the slowing economy for the shortfall.

Senate Majority Leader Tom Daschle appeared to blame the sweeping tax cut sought by President Bush -- and passed by Congress despite Democratic objections -- for the revised economic forecasts.

"Here we are already looking at tapping into Medicare and Social Security, just because we've created this situation with the tax cut and the budget that was passed earlier this year. We've got to find a way to deal with that," he said on ABC's This Week.

Asked whether he wanted Congress to reconsider the tax cut, Daschle demurred.

"I'm not suggesting anything at this point. We may not have the votes to revisit it in the short term," he said. "But clearly, we've got to solve a problem that I think is becoming larger and larger, and that is, how do we meet our obligations? How do we do what we have to stay fiscally sound, and how do we protect Medicare and Social Security?"

In a somewhat unusual move, Lindsey issued a statement Sunday, charging that Daschle "misspoke" when he described the Bush administration's assessment of the federal budget surplus.

"Majority Leader Daschle misspoke this morning when he said the Bush administration would dip into Social Security and Medicare funds," Lindsey said. "The truth, in fact, is that Social Security dollars will be used only for Social Security and Medicare dollars will be used only for Medicare. The only reason for any decline in revenue is due to an economic slowdown that began last September."

In a briefing Friday with reporters, Lindsey said the slowing economy could cause tax revenues to be about $56 billion lower than the $2 trillion the government expected to take in this fiscal year, which ends September 30. Lindsey told reporters if those projections turn out to be accurate, the government would still see a federal budget surplus of $200 billion, which he said included excess revenues from Social Security and Medicare.

When asked how much of the federal budget surplus would remain, once Social Security and Medicare trust funds were excluded, a White House official said he did not know and would try to find out.

During the debate over the $1.35 trillion tax cut, which the president signed into law in May, Daschle and other Democrats argued the tax plan was too expensive and that it was based on a projected federal budget surplus that might not materialize.

"I hate to say I told you so, but we told you so," Daschle said Sunday.

A White House spokesman said Lindsey wanted to put out a statement. "The record needed to be corrected," said the spokesman. "Senator Daschle had asserted that we were planning to use Medicare and Social Security funds to pay for government programs," which the spokesman said is not true.

House Majority Leader Richard Armey said lawmakers could make up the difference on the spending side, leaving the Medicare and Social Security trust funds alone.

"And that means every one of us is going to have to be willing to make some trade-off decisions in this budget process, and that also means no raid on Social Security," he said on CNN.

"You can't take the tax cut back from the American people, so let's get busy and get serious about how we spend people's money and hold the line on spending. I hope Tom Daschle will be as energetic for holding the line against increased spending as he seems willing to take their tax cut away from them," Armey said.

CNN White House Correspondent Kelly Wallace contributed to this report

• Congressional Budget Office

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