WASHINGTON - In the face of new projections from the Congressional Budget Office (CBO) showing a cumulative budget deficit of $19 billion over the next three fiscal years, excluding the “off-budget” Social Security surplus, The Concord Coalition today warned that Congress and the Bush Administration are in danger of slipping back into the habit of routinely using Social Security surpluses to help balance the budget.
“The minor problem of temporarily dipping into the Social Security surplus by a small amount this year becomes a major problem if politicians once again get comfortable with the idea,” said Robert Bixby, executive director of The Concord Coalition.
“In recent years, a bipartisan, fiscally responsible consensus has developed that the Social Security surplus should be treated as a national savings account, and not used to pay for routine government spending or to provide general tax relief. These new budget projections severely test the willingness of lawmakers in both parties to maintain that commitment, which was much easier to make when it did not require any hard choices. With the non-Social Security surplus now essentially gone through 2005, hard choices are necessary. If they are not made the end result will likely be a squandered Social Security surplus,” Bixby said.
“The public should not take comfort in the fact that there is still a projected non-Social Security surplus of $847 billion over the next ten years. Almost all of it ¾ 94 percent ¾ comes in 2007 and beyond. Fully one-third of the total comes in 2011, the last year of the projection. [See chart in appendix (Requires Adobe Acrobat Reader)] It would be absurd fiscal planning to rely on a projected windfall that far out into the future,” Bixby said.
“Moreover, these numbers depend on a series of questionable assumptions that tend to understate likely expenses and overstate likely revenues. For example, the baseline assumes that discretionary spending will be held to the level of inflation (under 3 percent) over the next decade, and that the recently enacted tax cut will expire at the end of 2010. If one assumes that discretionary spending keeps pace with the economy by growing at roughly 5 percent annually, and that the tax cuts scheduled to expire between this year and 2010 remain in effect, the non-Social Security surplus of $847 billion becomes a deficit of $700 billion. Even with spending growth held to 4 percent annually in this example, the non-Social Security surplus is essentially erased,” Bixby said.