Raines: Don't Spend the Surplus

While he said the fiscal 1997 deficit will dip below $30 billion, Office of Management and Budget Director Franklin Raines Wednesday strongly warned Congress not to begin spending any imaginary budget surplus.

"You're talking about spending deficits," Raines said in a wide-ranging speech to the National Association of Manufacturers, later adding, "Until we balance the budget, we don't have additional money to spend." And even then, Raines said he does not favor passing a large tax cut, which many Republicans are pushing.

Raines said the OMB later this month will announce the FY97 deficit will be below $30 billion. But, contrary to estimates by some members of Congress, Raines said he does not expect the budget to reach balance in the current fiscal year. He said the FY98 deficit is expected to climb above $30 billion, adding, "We've always had that blip up."

Raines told the NAM members he wanted to "throw a bit of cold water" on plans to spend any surplus, adding that some of the so-called surpluses are nothing more than the result of better than expected budget deficit projections. Starting to spend that money would be a mistake, he said, commenting that "a live-for-today fiscal policy ... is a tremendous detriment for this country." It would amount to a return to the 1980s, when policy makers decided that deficits did not matter, he said.

Raines said the country faces a "generational deficit" in Medicare and Social Security, suggesting that paying down the debt could help keep those programs solvent when the Baby Boomers reach retirement age. He said he does not like the idea of investing Social Security funds in the stock market, but said President Clinton wants to find ways to encourage private savings for retirement.

Raines also said he expects a Medicare commission chartered to study solvency issues to be appointed in December. He said he would not favor a "substantial" tax cut whose purpose would be simply to shrink the size of the federal government.

Discussing the line item veto, Raines said he expects the administration to develop individual criteria for each spending bill, and the criteria will determine the number of vetoes.

"The president is going to look at each one individually," he said. "There is no quota."

To emphasize the president's involvement, Raines said Clinton deleted one project from the Defense appropriations bill vetoes at the last minute - a project involving the USS Intrepid stationed in New York. That project--a $13 million grant to the Intrepid Sea-Air-Space Foundation to refurbish the aircraft carrier--was on a list of possible vetoes sent to the president by Senate Commerce Chairman McCain. Raines said the president decided to delete the project from the veto list while he was in Brazil.