Social Security Proposal Clarified

Clinton administration sources and public policy analysts said last week and today that President Clinton's pledge to "save Social Security first" is really a way to reduce debt.

The fanfare that accompanied the arrival of the budget surplus died down last week when leading members of Congress began to acknowledge the surplus is really just a small credit against a massive unfunded Social Security liability. Testimony from Treasury Secretary Robert Rubin and Office of Management and Budget Director Franklin Raines left members scratching their heads about the budgetary mechanisms for saving Social Security, and House Speaker Newt Gingrich, R-Ga., sent a letter to Clinton seeking clarification of what exactly the administration was proposing.

The administration proposes to simply avoid using the surplus for either tax breaks or spending increases, according to OMB spokesman Larry Haas, who met with policy analysts from private organizations last week. By leaving the money in the bank, the Treasury will end up having to issue fewer bonds to finance the current national debt. With the government borrowing less to pay off its debts, there will be more money available for private sector activity, the administration argues. This will lead to economic expansion, more jobs, more taxable wages and, ultimately, more money flowing into the Social Security Trust Fund.

Robert Greenstein of the Center on Budget and Policy Priorities explained that, as part of the 1983 so-called Greenspan Commission, Congress raised payroll taxes to build up the fund before the Baby Boomers start to retire. Now that Baby Boomers are at their peak earning power and the economy is running strong, the Social Security Trust Fund is awash in receipts. The challenge is to manage that surplus for the long term, Greenstein said.

What Clinton has proposed--a hands-off approach to any budget surplus while the nation debates a range of options to prepare for the Baby Boomers' golden years--has something for everyone. After all, many fiscal conservatives, including Rep. Mark Neumann, R-Wis., have recommended debt reduction as the best course of action for the long-term health of the economy. On the other hand, liberal Democrats, including Senate Labor and Human Resources ranking member Edward Kennedy, D-Mass., are anxious to shore up the most sacred of entitlements.

Dan Mitchell of the Heritage Foundation argued that because the government cannot owe itself money, the president's pledge amounts simply to using today's tax revenue to pay tomorrow's bills. Ultimately, that money will come from taxpayers. But Mitchell conceded Clinton's strategy might work. "He'll probably kill tax cuts," Mitchell said.

Meanwhile, in what White House officials described as the presidential launch of a "national discussion" on Social Security, Clinton today told a Georgetown University audience he and Vice President Gore will participate in a "nonpartisan" regional Social Security forum on April 7 in Kansas City. The event will be the first of four such forums this year--all organized by the American Association of Retired Persons and the Concord Coalition.