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Who's to Blame for the Shrinking Surplus?

Aired August 29, 2001 - 19:30   ET



GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Patients' bill of rights. The education bill. Faith-based programs. The largest increase in military spending since Ronald Reagan.


TUCKER CARLSON, CO-HOST: Tonight, President Bush lays out his priorities for the fall. But can we afford it? Or will they come at the expense of Social Security?

ANNOUNCER: Live, from Washington, CROSSFIRE.

On the left, Bill Press; on the right, Tucker Carlson. In the CROSSFIRE, Democratic Congressman Jim Moran of Virginia, member of the Budge Committee, and vice chair of the Budget Committee, Republican Congressman John Sununu of New Hampshire.


CARLSON: Good evening and welcome to CROSSFIRE. President Bush announced his fall agenda this morning. It looks a lot like his summer agenda. Faith-based programs, a prescription drug benefit, more money for education and the military. The issues are the same, but Washington and the economy have changed. The budget surplus is officially smaller and that makes all the difference.

In a letter sent to the president today, Democratic leaders demanded the president find a new way to pay for his initiatives, a way that doesn't take money from Social Security. The White House response? Cut your own pet programs. The budget battle heats up. Which side will come out looking like spendthrifts? Which party will compromise its spending priorities? And by the time it's over, who will take blame for the souring economy? Let's hope it's Bill Press.

BILL PRESS, CO-HOST: Yeah, all the blame.

Congressman Sununu, I can't believe it. In just eight months you Republicans have taken this country from A-OK to IOU. I thought you were the fiscally responsible party?

REP. JOHN SUNUNU (R), NEW HAMPSHIRE: It was a Republican Congress, a Republican Budget Committee that balanced the budget in the first place. We've had four straight years of surpluses, and now everyone is screaming that we don't have enough money because this year the surplus will be instead of the largest in history, the second largest in history.

When was the last time we had four years in a row of surpluses? It hasn't happened in 70 years, and it certainly didn't happen with 35 years of Democrats controlling Congress. Nothing but deficits there.

CARLSON: Now, Congressman Moran, the Democrats are very upset about the tax cut. Apparently it has wrecked the economy.

REP. JIM MORAN (D), VIRGINIA: I'm just getting my composure after John's...

CARLSON: Let me wreck your composure, again. Let me ask you to explain why Democrats, if they're so upset about the tax cut, don't do anything to repeat it.

MORAN: Because we are not in control in the House nor are we in control of the White House. So, we know that the tax cut is not going to be restored, and as a result our kids are going to have to pay the cost of it.

I think that this tax cut is probably the most unconscionably selfish thing that one generation has done to its children's generation in American history.

You know, we had an unprecedented opportunity to pay off our debt, the debt of the baby boom generation, that we incurred during the 1980's, and instead of paying off that debt and funding the unfunded liability of Social Security and Medicare, when we retire we chose to give ourselves another reward, to spend the surplus by giving ourselves tax cuts.

PRESS: All right, Congressman Sununu, as Tucker said at the top of the show, the president laid out his agenda today. His fall agenda looks a lot like the summer agenda. In fact, it looks a lot like last summer's agenda, because when he was running for president he said over and over and over again, we can do it all. We can have it all. We can have this huge tax cut. We can have more military spending. We can have new money for education and a prescription drug plan. That was a big, fat lie, wasn't it?

SUNUNU: It was a big agenda, but it certainly is not a lie. In fact, the budget we're working on right now does just that. We're working on the 2002 budget, let's not forget about that. Did we set aside $300 billion for Medicare or prescription drug benefit? Absolutely.

Did we allow for an increase in discretionary spending? About 5 percent, which is more than the average family budget is going to get this year. You bet we did.

Are we going to balance the budget without using Social Security in 2002? Yes. And that's exactly with CBO and OMB both projected this week. To be sure, the economy is slower. Revenues are a little lower, and the surplus in 2001 is going to be a little bit less than expected, but it's still the second largest in history and despite what Jim says, we are paying down debt. By the end of this year, we'll have paid off $500 billion in the public debt. We'll pay off another $150 billion next year. When was the last time we paid off debt five years in a row? Certainly wasn't in your lifetime or mine.

PRESS: Well, you just flipped over one thing, that the CBO, Congressional Budget Office, also said, which is the surplus has shrunk so much, thanks to the economy, or, I mean, because of the economy, or whatever else, that they're actually going to have to take this year, borrow $9 billion from funds that were collected for Social Security.

So, I want to just get this down to what everybody can understand. It seems -- you know, I would not spend money at the end of the month without knowing how much money I have in the bank. Didn't you and President Bush do just that? You spent all this money, you spent the money for a tax cut, before you knew the money was there?

SUNUNU: Fiscal year 2001 hasn't ended yet. It ends in two months. We're going to have a surplus this year of between $150 billion and $160 billion. I don't know exactly where the revenues are going to come in. Neither do you.

But the fact is, it's a surplus. It's the second largest in history. We've got a tax cut and we've got it at just the right time. You saw the news today. The economy has slowed down. The last thing in the world that we should do is exactly what some Democrats are sort of suggesting, which is repeal that tax cut, the tax cut is bad...

PRESS: Name one.

SUNUNU: It's a problem.

PRESS: Name one.

SUNUNU: Conrad, today, a lot of suggestion there, a lot of reticence, a lot of regret about the tax cut, suggesting that somehow...

PRESS: You mean Kent Conrad said raise taxes today?

SUNUNU: ... absolutely. He didn't say raise taxes, but in disparaging the whole concept of putting more money in the average worker's pocket, I think they're sending the wrong signal. The signal should be, money in the pocket's of working families helps the economy. That this is just the right time for these rebate checks to be going out. And by cutting rates across the board, cutting marginal rates, we do more than anything else to increase long-term productivity.

This is a president with an economic package. He's passed an energy policy, he's rolled back some regulations to help free up the economy. He's cut taxes. And now he's looking at the kinds of investments in the long-term that will allow us to expand trade. We didn't have an economic policy in the previous administration.

PRESS: We've got to get Tucker in here.

CARLSON: Yeah, well, I just can't wait to get at Congressman Moran, here.

PRESS: He can't wait to get back at you.

CARLSON: The latest -- well, I'll bet he can't. The latest Democratic talking point is that the president, through his tax cut, is going to force the government to spend Social Security trust money.

Of course, actually the money they're talking about is the surplus, Social Security surplus. Let me read you Robert Reich former labor secretary under Bill Clinton, his description of that surplus. This is from a piece this morning in "The Wall Street Journal." This is Robert Reich keep in mind, a liberal Democrat.

Quote: "The Bush administration should state flatly it doesn't matter if the so-called Social Security surplus erodes this year or even next. The Social Security surplus is accounting fiction. It didn't even exist until 18 months ago when some Democratic advisers thought such an invention might be a good bulwark against candidate Bush's proposed tax cut."

MORAN: I don't agree with Bob Reich. I respect his views, but...

CARLSON: But what about that statement is false? I mean, it didn't exist 18 months ago, did it?

MORAN: The surplus that John is talking about, first of all, is Social Security trust fund surplus and that money needs to be put aside, because when the baby boom generation starts retiring after 2008, and most of us start retiring in 2011, when the tax cut supposedly is terminated, that's when we start doubling the retirement rolls.

We put that money aside -- just as any family would put their money aside for retirement, we should be putting that money aside for retirement, not spending it if we don't have it. And that's why I don't think we should be paying it out in tax cuts to reward ourselves, because it means that our kids are going to have to pay for our retirement as a result, and pay off the debt that we incur.

CARLSON: Well, wait a second. This is, you must admit, a complete change of heart, at least for most Democrats.

MORAN: It isn't.

CARLSON: Well, hold on. President Bush really got to the bottom-line the other day. This is from his speech in Independence, Missouri. Listen to President Bush's facts about the Social Security surplus.

MORAN: If you insist. CARLSON: Here he is.


BUSH: Seven out of the last eight budgets submitted by the executive and passed by the Congress have raided the Social Security, or used part of the Social Security, to fund the budgets.


CARLSON: So, basically what he's saying, and this is incontrovertible, the Democrats for many years have had no problem taking money fro Social Security. All of the sudden it's sacrosanct now that we have a Republican president. It's true.

MORAN: We, you are right, that we started really raiding the Social Security and Medicare trust funds amassed in the 1980's during the Reagan and Bush administrations. That's when it started big time. There was a Democrat Congress and we collaborated with the administration, spending money we didn't have.

But we had an unprecedented opportunity, and it's really because of the 1993 tax increases that enabled us to balance the budget and create a surplus, without one Republican vote whatsoever in the House. But, we created that surplus, so we had an unprecedented opportunity...

CARLSON: Is the answer to increase taxes now? Is that the answer now? To increase taxes?

MORAN: The answer is not to give ourselves tax breaks when we don't have the money, John. We shouldn't reward ourselves if we're going to need it later to pay off debt.

You know, you say this is American tax payers money, but it's also American tax payers debt. If we don't pay off that debt when it matures, whose going to pay it? It's our kids that are going to pay it.

SUNUNU: We've paid off more in debt in the last five years than at any time of our countries history. And if you look at the projections that came out this week, we'll retire the entire public debt in the next ten years.

MORAN: No we won't. $3 trillion matures at the end of...

SUNUNU: It is inconceivable -- inconceivable...


MORAN: $3 trillion matures in ten years and we're not going to pay that back, John.

PRESS: Now, I want to get to this fallacy floated by Tucker, here, that Democrats came up with this idea that they're not going to touch the Social Security surplus. You know, when I want the truth, I go to the source. I got to the Republican party platform, John Sununu. And I want you to look at...

MORAN: These guys have done their homework.

PRESS: The 2000 Republican party platform. I'm going to quote it...

UNIDENTIFIED MALE: You're probably the only one whose read it.

PRESS: Quote: "The Social Security surplus is off limits, off budget and will not be touched."

There is no wiggle room there. Now, I want to ask you, is that still the Republican party bible and do you believe in it?

SUNUNU: That is absolutely still the Republican party commitment, is to put together budgets that do just that. We did it for the first time two years ago.

Now, let's go back two years. Two years ago, the president, in his state of the union address decreed he was going to set aside 60 percent of the Social Security surplus and spend the other 40 percent. That was just two years ago.

It was our Budget Committee, the Republicans on the Budget Committee, that said that's wrong; we're going to put together a budget that sets aside 100 percent. We did it again last year. And at the end of this fiscal year, we'll find out whether we meet that goal or fall short by $1 billion or $2 billion. But the point is, we're putting together a new budget now for 2002 and it's going to meet exactly the same commitment.

PRESS: I'm glad to hear it's so firm. I'm glad to hear it's etched in stone. Now I want you to listen to what Mitch Daniels, President Bush's budget director, said yesterday, quoted in "The New York Times." He said, "We're going to do everything we can not to touch Social Security. But," he says, "it would be a mistake to shortchange fundamental priorities like defense or education to prevent any use of Social Security money for any other purpose."

He is already admitting, the lock box is gone, they've already decided, they're going to break it open. They're going to spend it. They're stealing from that money, that Social Security.

SUNUNU: Bill...

PRESS: Would you agree it contradicts...

SUNUNU: When we come into conference in 2002, and when we deal with any supplemental bills for defense or of any other matters, for that matter, we're going to look at where that puts us in the 2002 budget. And I believe when all is said and done, when we complete the appropriations cycle in the fall, we'll have budget projections that show us balancing the budget without relying on Social Security...

PRESS: Not touching Social Security... SUNUNU: For 2002. Absolutely. Absolutely. Especially given how aggressively Democrats have pursued this issue. The whole reason for setting that aside in the first place, and part of the reason for cutting taxes, was to keep it off the table from being spent. Because, if you listen to people now, they're talking about priority after priority or priority, and that's above and beyond the 5 percent increase. That's the sure way to push us back into deficits.

MORAN: Well, I'm glad you admitted that the real motivation behind the tax cut is to reduce the size of government, but I think it's hypocritical. The reality is that during the Clinton administration, the Republican Congress spent more than President Clinton ever asked. The Democratic Congress spent less than President Reagan ever asked for and in this Congress the Republican Congress and the White House are going to spend more than the Democrats are going to vote for.

You're going to vote for the defense budget. You're going to vote for the labor, health and education budget, and that money is going to come out of Social Security. We're going to take $18 billion for Social Security to fund the defense increase and we're going to take a substantial amount to fund the education. And I'll bet you're going to vote for it, John, and we don't have that surplus.

SUNUNU: One, I don't believe that's going to happen. But, two, I agree with you. Spending is the problem. Spending is what creates deficits. In this town, if it's left on the table, it's going to get spent.

PRESS: One thing these gentlemen agree on, there is a fiscal mess. When we come back, let's talk about who and what is to blame. Tax cut or the economy? Right back, more CROSSFIRE.


PRESS: Welcome back to CROSSFIRE. Well, we got rid of one problem, what to do with all that money, but now that the surplus has disappeared, we've got another problem: how to pay for education, the military and prescription drugs. President Bush says those are his priority items for the fall, but where will the money come from? Will the economy suddenly bounce back, or will we be back to deficit spending?

Looking for dollars wherever they can find them tonight, Republican Congressman John Sununu of New Hampshire, who is confident there will be enough money left, and Democratic Congressman Jim Moran of Virginia, who says we could be broke. Tucker.

CARLSON: Congressman Moran, the implication that somehow the tax cut tanked the economy, you know and I know and certainly everyone who is an economist knows it is totally ludicrous, that the real culprit here is the economy. And that Bush inherited an economy on the slide. On inauguration day, the NASDAQ was down 70 points.

MORAN: Tucker...

CARLSON: So, this is what you get when the economy goes down when you become president.

MORAN: The tax cut didn't tank the economy, but the tax cut does tank the surplus. That's the problem.

We are responsible for the federal revenue that comes in, making priorities for how that revenue is spent, and I think our first priority should be pay off our debt. Second, it should be take care of our unfunded liabilities in the future, for Social Security and Medicare. Then, thirdly, I think we should give back stimulative tax cuts and I think we should invest in things like education, training to improve the productivity of the work force.

The reason the economy was so strong in the 1990's was the productivity of our work force. There was innovation. There were skilled, trained personnel working, creating, American products. And we're going to lose that if we don't have a good educational system.

CARLSON: But the economy, as I think we both agree, was already on its way down when Bill Clinton left office. But you're missing a step.

MORAN: It couldn't be sustained for more than eight years in a row.

CARLSON: And that may or may not be true, but you're missing a step when you say the surplus -- I mean, the surplus is down because receipts are down because the economy is down.

MORAN: Yeah, but we don't...


MORAN: ... but we don't stand on the sidelines as passive observers. If the surplus is going to go down, then we try to account for that. We choose our priorities. We don't give away money we don't have.

We knew the surplus was going to go down when we passed the budget resolution. The budget resolution was based upon an inflated surplus. It was really at the peak of our economic prosperity.

John remembers when I said in the budget resolution that when we were debating it, you know, corporate earnings are down. They are not reflected in these budget estimates. We should be more cautious than this. But we went full-bore, because the president had promised a tax cut. He felt he was committed to it and he stuck us with it. And I don't think that it was the smart thing to do. We should have put a trigger in there that said if the surplus estimates go down, then we modify the tax cut accordingly.

Unfortunately, what the tax cut said is that the if surplus estimates go down, you don't cut the tax cut. If they go up, then you raise taxes. That's not prudent. It's not balanced and I don't think it was responsible.

PRESS: Congressman, I see you shaking your head. I can't tell whether you agree or disagree, but it seems to me that there is the point. The point is not that the economy started going down last fall. It did and we all saw it coming. Look at my 401(k), look at yours. I mean, we all saw it.

But -- so we knew at least there was a chance that that money, upon which the tax cut was predicated, might not show up, and it did not show up. Wouldn't the responsible thing to do be to wait until we saw what the revenues were or at least put a trigger in so we don't end up busted today?

SUNUNU: If your principle is let's always wait to see what next year's revenue is before cutting taxes, guess what? You'll never cut taxes...

PRESS: Before spending; how about before spending?

SUNUNU: You don't cut taxes -- you're -- I'm certainly for controlling spending. I've pointed out before, spending is the problem. But you're talking about tax cuts. You don't cut taxes for one year, either. You cut taxes for the long-term. And what Jim talks about is to promise people that if things slow down, you're going to stick them with a tax increase, because the tax cuts will go away. That's foolish policy.

What we need to do is create good tax policy. Lower marginal rates to encourage the kind of productivity Jim rightly talks about, that is driving economic growth. We need to continue to set aside the Social Security surpluses and why are we doing that in the first place? So that we have money to help strengthen and modernize both Social Security and Medicare.

Jim and I agree on that as well. The question is, are we going to be able to keep the budget balanced? Go ahead. We're dealing with it.

PRESS: You keep saying you're setting aside the Social Security surplus. Mitch Daniels has admitted you're spending it this year. The Congressional Budget Office...

SUNUNU: That's for 2001. We're debating the 2002 budget, the budget resolution Jim was just talking about is the 2002 budget resolution. The bills that we're going to be dealing with this coming fall are all for 2002.


SUNUNU: And if you look at those projections, we balance the budget without using the surplus.

PRESS: Congressman, the Congressional Budget -- the Congressional Budget Office says you're spending -- I'm sorry to talk over you. The Congressional Budget office says you're spending, you'll have to spend $9 billion of those Social Security funds this year, not next year.

SUNUNU: Fiscal year 2001. That budget... PRESS: So, let me pause it...

SUNUNU: That budget was passed when Bill Clinton was president. Those appropriations bills were passed when Bill Clinton was president...

PRESS: Here's the point, though...

SUNUNU: And I'm not blaming him, but you need to understand how the federal budget works.

PRESS: My point is this: that George Bush promised not to touch the Social Security surplus and he's going to have to do it. So, my question to you is, I want to remind you, if I can, of something that Bush 41 said, which proved to be his downfall. Let's listen again. Here's Bush 41.


GEORGE H.W. BUSH, 41ST PRESIDENT OF THE UNITED STATES: Read my lips: no new taxes.


PRESS: Now, I'd bet you that about a year from now they're going to be playing Bush 43 saying "read my lips, no Social Security lock box," and he's politically dead.

SUNUNU: I think you're completely missing the fundamental fact that this president came into office at the beginning of 2001. He submitted a 2002 fiscal year budget to Congress. That's the one we're working on right now. It'll balance without using Social Security. Moreover, you're certainly ignoring the fact that we've got four running years of the largest surpluses in our country's history. This year's surplus will unfortunately be only the second largest in our country's history, but we've done -- accomplished record achievements of paying down debt, more than ever in our country's history, and we are funding priorities in education...


MORAN: John, I have to cut in, here. The surplus we're talking about is trust fund surplus. When people pay money into Social Security and Medicare, they expect that it's going to stay in those trust funds. Secondly, President Clinton would not have been spending trust, Social Security trust fund surplus this year because he wouldn't have given out the $38 billion tax cut...

SUNUNU: Because he vetoed...


MORAN: Because he didn't think that the -- was sure the money was there. And you voted for that lock box, to leave that money in the trust fund, John, and now you're going to let it be spent.


SUNUNU: He vetoed a state tax repeal. He vetoed every single tax cut we would send...

CARLSON: Here we go! Congressman Moran?


MORAN: President Clinton had balanced budgets. We're going to have deficit spending under George Bush. The proof is in the pudding.

CARLSON: We're going to have to continue this in the hallway.

Congressmen, thank you both, very much.

MORAN: Thank you.

CARLSON: Bill Press and I will be back in just a moment. Should the lock box be unlocked? We'll tell you in our closing comments. We'll be right back.


CARLSON: OK, Bill, do you want my Democrat imitation?

PRESS: I'm ready.

CARLSON: The tax cut, it's wrecking the economy! It causes cancer! It's evil, it's from Satan! OK, Democrats, what do you want to do about it? Nothing. Nothing. If it's so terrible, why doesn't Congress -- Democrats control half of Congress. They're almost half of the House, they control the Senate. Why don't they repeal it? Why don't they do something about it?

PRESS: All right, now it's my turn. I'm going to give you my George Bush imitation. Two plus two equals five. You know, his numbers don't add up, Tucker. The guy never learned to add. It's what his father called voodoo economics. You cannot give all the money away and then say, oh, where'd all the money go? Irresponsible!

CARLSON: OK, we're talking about (UNINTELLIGIBLE). It's so remarkable to say Democrats, and you particularly, talk about irresponsible economics...

PRESS: Well, I'm a responsible person!

CARLSON: As if you're the bulwark against these wild-eyed spendthrifts on the Republican side. That's insane!

PRESS: I do not spend...

CARLSON: We're talking about a surplus, here.

PRESS: I do not spend money I don't have and I don't steal from anybody else.

CARLSON: And neither is George W. Bush.

PRESS: Oh, yes he is. Stealing from seniors.

CARLSON: Oh, that's ridiculous.

PRESS: From the left, I'm Bill Press. Good night from CROSSFIRE.

CARLSON: And from the right, I'm Tucker Carlson. Join us again tomorrow night for yet another edition of CROSSFIRE.



4:30pm ET, 4/16

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