The following editorial appeared in today's Washington Post:
The administration and congressional Democrats are having a silly argument about the budget. It's not the underlying issue that's trivial but the method of keeping score. The dispute is whether, having granted a tax cut, the parties will have to tap the Social Security surplus to cover current governmental costs. The administration will put out new figures this week suggesting that the answer is no; without touching Social Security, there will be money enough to cover current costs and a couple of billion to spare, it will say.
The Democrats say not so, that the administration's figures are phony and that the need to borrow from Social Security even in the first year of the tax cut is proof that the cut was excessive and will strand important programs over time. The Congressional Budget Office is likewise expected to say in a couple of weeks that the government will almost surely have to use Social Security funds to cover other costs and there you'll have it - a huge eraser fight. But the facts are more complicated than they will be made to sound.
Whenever there is a Social Security - or Medicare - surplus, the government "taps" it, in the sense that the money is used for other purposes and IOUs are put in the trust funds. The question is, which purposes. Will the money be used to pay down debt and thereby be "saved" against the day when it will be needed to finance the baby boomers' retirement, or will some of it be used in the year collected to help pay for defense, law enforcement, the parks, etc.? The trust funds are in the same shape either way; they have the IOUs. Social Security and Medicare are in that sense unaffected.
The tapping of the funds is thus more a matter of political symbolism than of substance, and the more so because not all that much money is likely to be involved. The great bulk of at least the Social Security surplus will still be used to pay down debt. And the symbolism itself gets a little muddy for the Democrats, in that the parts of the tax cut taking effect in these early years were to a large extent their ideas. The large and unaffordable rate and other cuts that were the heart of the president's proposal don't take effect until later.
Those long-term effects are what the real fight is or should be about. The likely, mostly modest tapping of the trust funds over the next few years is merely a symbol of that future reality. The serious question is whether, in the long run, the president's part of the tax cut - which is the bulk of it - will leave enough to cover foreseeable government costs. The answer is no, and that is why the cut was reckless.
The estimates that will come out this week and next will suggest otherwise, in that they will show sizable surpluses over the next 10 years. But the figures will be deceptive; the estimating conventions require the forecasters to use what they themselves will tell you are unrealistic assumptions. The figures assume that over the next 10 years both parties will undergo a fiscal transformation will support deep cuts in domestic programs for which neither is prepared to vote, nor should be, given the value of some of the programs and the harm that would ensue.
The surplus estimates make no allowance for the defense buildup that the president appears to have in mind, and that both parties profess to support in varying degrees, nor for the level of farm spending - $70 billion more than current law - that they appear about to approve. No money, or nowhere near enough, is set aside to fortify Social Security and Medicare, much less to finance the drug benefit that so many rightly want to add to Medicare. The estimators accepted, because the conventions left them no choice, the phony accounting whereby Congress made it appear that the tax cut would cost "only" $1.3 trillion over 10 years; no matter that the cost when all provisions are fully in effect will likely be three times that.
Critics make much of the unfunded liability of the Social Security program. But the long-term cost of the tax cut, which some of those critics are wont to minimize, is in fact much larger than that liability. It doesn't much matter if the government lightly taps the Social Security trust fund this year to cover current costs. But over time, if not reversed, this tax cut strips the government of the means to meet its obligations.
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