Republicans Plan Cuts to Close Budget Gap

Yahoo! News ^ | Sept. 10, 2001 | Vicki Allen

[Alissa]

WASHINGTON (Reuters) - With the government poised to drain some $12 billion from Social Security surpluses this year, Republicans in the House of Representatives on Monday pushed a plan to cut next year's budget to make up for whatever was taken from the pension program this year.

The House Budget Committee was slated on Tuesday to take up the bill that would impose across-the-board spending cuts in the next fiscal year starting on Oct. 1 to compensate for whatever Social Security funds are used to get the government through the final days of this fiscal year.

House Budget Committee Chairman Jim Nussle, an Iowa Republican, said the plan would ensure that lawmakers meet their commitment to use Social Security surpluses to pay down national debt and not for other government spending.

Republicans also see it as a way to shift blame for the likely tapping of Social Security funds this year to the Democratic-led Senate, or to put pressure on Democrats to agree to tighter spending limits.

``We'll have our vote and I hope the Senate will join us. If they don't, I think they have to take some responsibility for spending the money,'' said Rep. Roy Blunt of Missouri, chief deputy Republican House whip.

Republicans hoped for a House floor vote on the measure later in the week as they struggle with shrinking surpluses left from the souring economy and President Bush's $1.35 trillion 10-year tax cuts.

Some congressional aides privately said they doubted the measure would be enacted, and analysts said it would only worsen next year's economic bind.

``Policy-wise, there are no easy choices here. It's kind of like pushing in on a balloon. It's going to push out some place else,'' said Stanley Collander, of Fleishman-Hillard corporate consultants.

If the economy remains weak or worsens, the government could be forced to make much steeper spending cuts next year when the economy needs a stimulus most, and in a congressional election year, analysts said.

Republicans, who hold the presidency and control the House but not the Senate, are increasingly worried about being blamed for an election-year recession -- a fear Democrats are working to reinforce.

``He got us into this mess. He needs to give us a blueprint to get out of this mess,'' Assistant Senate Democratic leader Harry Reid of Nevada said of Bush. ``We're going back to the days of deficits already.''

LOCKBOX SYMBOL

Nussle said the government was facing a potential shortfall of about $12 billion this year, which would be offset by across-the-board cuts next fiscal year of about 3 percent in most government programs including defense, but excluding Social Security, Medicare and other benefits programs.

Those projections could change, and he said the cuts would be determined after the fiscal 2001 books are closed and it is known how much Social Security money was used.

The cuts would ensure that the government met its targets for paying down $162 billion in national debt, he said.

While there is no effect on current pension benefits from using Social Security surpluses for other programs, analysts said the legislative ``lockbox'' that lawmakers have erected around the pension program is a powerful political symbol.

``If the economy continues a downward slide and the lockbox is picked, the Democrats will hang it around the neck of Republicans in next year's election,'' said Marshall Wittmann of the conservative Hudson Institute.

Many analysts say using Social Surpluses to reduce debt should strengthen the economy, putting the government on a stronger footing for the upcoming retirement of baby boomers.

The senior Republican on the Senate Budget Committee, Pete Domenici of New Mexico, created a stir last week when he broke ranks and said there would be no harm in tapping some Social Security surpluses to avoid a budget squeeze.

That might be better than potentially damaging government spending cuts during an economic downturn, Domenici said. Few from either party publicly agreed with him.

Republican Sen. George Voinovich of Ohio and Democratic Sen. Zell Miller of Georgia are planning legislation to require across-the-board budget cuts in programs other than Social Security and Medicare if the budget encroaches on Social Security surpluses in fiscal 2002 and beyond.

``They want to make a long-term structural change to protect Social Security,'' said a Voinovich aide. He said Voinovich is working with the White House on a plan that Bush would back.

[gov_bean_ counter]

That might be better than potentially damaging government spending cuts during an economic downturn, Domenici said. Few from either party publicly agreed with him.

Major crock of stuff. Automatic reductions in proposed increases in government spending would decrease the incentive to spend like crazy the end of this month, because the baseline would have been made irrelevant.