Social Security Surplus Shaping Up As An Election Year Battleground
By Andrew Taylor, CQ Staff Writer
House Republicans are betting that their drive for an election year tax cut will be a smashing political success even though it is doomed to stall in the Senate or be killed by President Clinton.
Buoyed by ever-growing forecasts of budget surpluses, House GOP leaders have abandoned any pretense of financing a tax cut with offsetting spending cuts and instead want to tap about half of a 10-year, $1.6 trillion surplus for tax cuts for working couples, investors and heirs to large estates.
But Democrats appear comfortable with scuttling any effort to cut taxes that would use a surplus almost exclusively made up of Social Security revenues. Senate Minority Leader Tom Daschle, D-S.D., vowed July 22 to use every tactical device in his arsenal to kill any tax bill that relies on the surplus.
And Clinton, who got out in front of Republicans months ago by vowing that any tax cuts should wait until the Social Security system is overhauled in preparation for an influx of retiring Baby Boomers, stands squarely against the idea.
"It seems to me it's worth taking one year to address the challenge of fixing the Social Security system before we start spending the surplus on tax cuts or new spending programs, however worthy they might be," Clinton said July 22.
Clinton's comments came as House GOP leaders endorsed a plan by Budget Committee Chairman John R. Kasich, R-Ohio, to use $167 billion of the surplus over the next five years for a tax cut. Another $338 billion would be used to pay down the national debt or otherwise strengthen Social Security. Over 10 years, about $700 billion of the surplus would be devoted to tax cuts and $700 billion to Social Security.
It is not just Democrats who stand in the way of a tax bill. Many Senate Republicans are cool or, in the case of Budget Committee Chairman Pete V. Domenici, R-N.M., outright hostile to the idea. Even Majority Leader Trent Lott, R-Miss. -- who conservatives were counting on to push for tax cuts -- sounds ambivalent.
"I do think we need to try to identify how much is it that we do need to . . . protect Social Security, take it off budget and to preserve its future," he said July 21. "If there is any left over . . . it should be returned to the people that earn that money." Any effort to overhaul Social Security, however, will not begin until next year at the earliest.
Masking the Deficit
With the surplus far larger than projected only months ago, House conservatives are increasingly comfortable with using part of it for their tax agenda. The huge surpluses, combined with the Senate's reluctance to cut spending, have muted talk of financing a tax bill with politically difficult budget cuts. "It gets harder to do spending cuts in light of the surplus," Kasich said. (Budget, CQ Weekly, pp. 1928, 1675)
Republicans are countering Democrats' mantra about Social Security with a message of their own: Unless part of the surplus is given back to taxpayers, lawmakers in Washington will devise ways to spend it on new government programs. "The liberals want to keep the money in Washington so they can spend it in Washington," said House Speaker Newt Gingrich, R-Ga.
Republicans acidly note one of the central flaws in Democrats' arguments about Social Security -- that presidents and lawmakers of both parties have for years relied on Social Security surpluses to hide the size of the federal government's so-called operating deficit. And last year's balanced-budget and tax laws (PL 105-33, 105-34) projected that the federal budget would reach balance by using Social Security surpluses.
"[Democrats], for over a generation, have used Social Security for every liberal program they ever dreamed of," said GOP Conference Chairman John A. Boehner of Ohio.
Members of both parties, including Sen. Ernest F. Hollings, D-S.C., have argued for years that it is wrong to use Social Security revenues to mask the size of the deficit. The issue assumed a higher profile during the 1995 debate on a constitutional amendment to balance the budget, when several Senate Democrats, including Daschle, seized on the Social Security issue to justify switching their votes to oppose the measure, which fell one vote short.
Nervousness over Social Security also was the main reason House leaders canceled a vote on the balanced-budget amendment last year. Democrats argued that the proposal -- which would have required a balanced budget including Social Security surpluses -- would have given too much incentive to cut Social Security benefits to balance the budget.
Many Senate Republicans are also cautious about tax cuts and believe, as Clinton does, that fixing Social Security is a more immediate concern.
"I believe in saving Social Security first," said Sen. Slade Gorton, R-Wash., as he left a July 22 strategy meeting in Lott's office on tax and budget issues.
Almost all of the $1.6 trillion in projected surpluses comes from surplus revenues flowing into the Social Security system's trust funds. Only $31 billion of the surplus over 10 years would accrue from surpluses in the government's operating budget.
When saying that the surplus should be dedicated to Social Security, Clinton is really advocating using the money to pay down the $5.5 trillion national debt, not funnel it into the Social Security system. That may occur, but only as Clinton and Congress work next year on an overhaul plan.
Senate rules give Democrats ample opportunity to wreck any tax bill that is financed by the surplus. Under "pay as you go" (PAYGO) budget rules, any tax bill that is not fully offset by cuts in mandatory programs such as Medicare or Medicaid can be killed on a point of order that would require 60 votes to waive. Daschle said he is confident that he can unite the Senate's 45 Democrats to block such a bill. But it is also clear that Lott could not even muster a simple majority in the first place for any tax cut that depends on the budget surplus.
Asked whether his caution on tax cuts was due to his personal beliefs on Social Security or the parliamentary reality that gives Democrats such leverage, Lott chuckled and answered, "Yes."
Strategy
Talks between Kasich and Domenici have yielded no progress toward agreement on the long-overdue fiscal 1999 budget resolution (HConRes284). Until both the House and Senate pass a final version of the annual budget blueprint, lawmakers cannot piece together a budget-reconciliation bill, which seeks to reconcile tax and spending policies with broader budget goals. A procedural advantage of such bills is that they are not subject to filibusters. But since PAYGO rules would require 60 votes to pass a tax bill anyway, most of the procedural protections that come with the reconciliation process would be lost.
Without reconciliation, one option would be for the House to craft a stand-alone tax bill. The chief benefit of that would be that it would not require the House and Senate to reach agreement on a budget resolution before moving a tax bill.
But Senate debate on a stand-alone bill could easily turn into an election year free-for-all, with Democrats forcing votes on a series of issues on the Democratic agenda, such as child care tax credits. And it would revive a painful debate over tobacco that, in all likelihood, would increase taxes on cigarettes. (Tobacco, CQ Weekly, p. 1760)
The Senate reacted coolly to the House leadership's plans for a surplus-driven tax cut. "A non-starter," said a top Senate GOP staff aide.
Even some senators who support a tax cut are upset that the House proposal is so ambitious that it is delaying progress on a more realistic tax bill.
"They are thwarting any attempt to get a real tax cut, a real reduction of the marriage penalty, a real cut in capital gains that we might be able to pass and put on the president's desk," said the Senate GOP aide.
Although House leaders are enthusiastic about a big tax cut along the lines of Kasich's proposal, the rank and file are split on the question of whether to dedicate the surplus to tax cuts or to paying down the national debt. Assembling a tax bill that can garner the support of both budget hawks and tax cut advocates will be a delicate and difficult process that will not get under way until September.
Risky Agenda
The House Republican tax agenda aims to whip up support among core conservative voters and get them to the polls in November. Republicans say that among people most likely to vote, tax cuts are a big priority.
But the agenda is not without risk. Democrats will certainly portray the effort -- as they already are -- as raiding Social Security to pay for a tax cut. Social Security has had a reputation as the "third rail of American politics" -- touch it and you die -- and it is sure to be fodder for 30-second campaign advertisements.
Opinion polls show that the public prefers paying down the national debt to another round of tax cuts. In a recent Wall Street Journal/NBC News poll, 43 percent of respondents said shoring up Social Security and Medicare would be a major factor in how they vote this year, compared with 28 percent whose votes would depend on tax cuts.
Not only the public is cautious. Federal Reserve Board Chairman Alan Greenspan warned July 22 that the projected surpluses may well drop if the stock market slides. He said a breach in budget discipline "indirectly . . . does have an effect on how the central bank behaves" in deciding whether to raise interest rates.
© 1998 Congressional Quarterly Inc. All Rights Reserved.
|
News
Click here