The Same Trick Again

Posted: Jul 17, 2001 12:00 AM
Back in the 1980s, Democrats in Congress had a trick they used over and over again to get Ronald Reagan to approve bloated budgets. They would wait until just before the end of the fiscal year on Sept. 30 to send appropriations bills to the president for his signature. If he vetoed the bill because of excessive spending, it would lead to a government shutdown on October 1. Congress often worsened this situation by combining several of the 13 individual appropriations bills into package bills. This made them even harder to veto, because it would affect more agencies and programs. Sadly, this trick worked like clockwork year after year. Without line item veto authority, which would allow him to veto only portions of appropriations bills, there really wasn't much Reagan could do. The result was that spending and deficits went up and up. Now Congress is getting ready to play this trick again. The Democratic Senate in particular has dragged its feet on appropriations bills, setting up an almost inevitable budget train wreck in September. Rather than do the work they were elected to do, the majority Democrats would rather spend their time spinning the budget, so that George W. Bush will get the blame when the time comes. One of the key issues Democrats are trying to get mileage out of is claiming that the tax cut is eating into the Social Security surplus. This implies, falsely, that Social Security benefits are somehow at risk. In fact, there is essentially no relationship between the size of the Social Security trust fund, or the amount of the budget surplus attributable to the excess of current Social Security revenues over benefits, and the payment of benefits. Everyone currently receiving Social Security benefits now and the foreseeable future will get exactly the same check regardless of whether some mythical "lockbox" is broken. Furthermore, virtually all Democratic discussion of the alleged Medicare surplus is fundamentally dishonest. There is a "surplus" only in Part A of the Medicare program, which is financed by payroll taxes and pays only for hospital costs. Medicare Part B, which pays for physician services, is in perpetual deficit. Unlike Medicare Part A, Part B is not financed by payroll taxes, but by "premiums" paid by beneficiaries that cover only 25 percent of its cost. The balance -- in effect a deficit -- is covered by general revenues paid for by all taxpayers. This year, taxpayers will pay $70 billion to cover Medicare Part B's deficit. As a result, the overall Medicare program, Parts A and B combined, will run a deficit of $56 billion. Nevertheless, many seniors are going to be misled in coming months into believing that the declining surplus somehow threatens their Social Security or Medicare benefits. They will also be told that this results from Bush's "excessive" tax cut. They are unlikely to hear in the major media that the lower revenues result exclusively from the economic slowdown, not the tax cut, or that the Democrats' proposed tax cut would have cut revenues even more in 2002 than the version that became law. It would help everyone who has any interest in budget issues a great deal if the substantively meaningless distinctions between "trust fund" revenues and outlays was dispensed with. The only number that matters at the end of the day is whether the government has total revenues sufficient to cover total outlays. If it does not and there is a deficit, this figure should correspond to the amount of money the government borrows from private financial markets. The notion of trust funds also confuses beneficiaries about what they are entitled to. In the case of a private trust fund, the size of the fund matters because benefits are directly related to it. But with Social Security, benefits are established by law and have no relationship to the trust fund. That is why the federal government has been able to get away with reducing Social Security benefits, relative to taxes paid, for decades, even as the Social Security trust fund grew. As a new Congressional Research Service report explains, the number of years it takes a worker to recover his payroll taxes in the form of benefits has risen every year and will continue to rise in the future. In 1980, an average worker got back all his and his employer's taxes plus interest in 2.8 years worth of benefits after age 65. This year it will take 16.8 years and by the year 2030, it will take 23.5 years. At a recent House Budget Committee hearing, there was some discussion of the need for a new method of presenting budget data. Current methods date from the 1960s and need to be brought up to date. If this is done, changing the presentation of trust funds should certainly be adopted to make it harder for irresponsible politicians to use them for their own selfish purposes.