From: "Max B. Sawicky" <maxsaw at cpcug.org> To: "Lbo-Talk" <lbo-talk at lists.panix.com> Subject: FW: Minge-Herger Bill Date: Thu, 4 Mar 1999 11:57:55 -0500 Message-ID: <001801be6660$260e0860$3bf246d1 at epi59.epinet.org> MIME-Version: 1.0 Content-Type: text/plain;
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I don't make a habit of cross-posting much besides the petitions of outraged economists, but the following speaks to an issue raised yesterday by John T.
mbs
-----Original Message----- From: owner-ssip_list at lists.ourfuture.org [mailto:owner-ssip_list at lists.ourfuture.org] On Behalf Of Social Security Information Project Sent: Thursday, March 04, 1999 11:40 AM To: Multiple recipients of list ssip_list Subject: Minge-Herger Bill
************************************* Social Security Information Project Institute for America's Future *************************************
March 4, 1999
Last week Rep Wally Herger (R-CA) and conservative Democrat David Minge (D-MN) introduced a bill (HR 863) that would allow part of future budget surpluses to be used for tax cuts by walling off the trust fund monies but opening up the interest payments for use by GOP tax cutters. As the New York Times noted yesterday, "the practical effect of their plan would be precisely to allow the [Social Security] money left on the table to be used for tax cuts" The concept has been rejected by Democrats and most Senate Republicans, however the House GOP is still warm to the idea.
Attached below is a copy of the bill and several news accounts of this debate.
1. HR 863 - Minge-Herger Bill 2. AP: CBO faults both sides of Social Security debate 3. NYT: Republicans Offer a Plan to End Reliance on Social Security 4. Reuters: Republicans Say Readying Plan On Social Security 5. WSJ: Some Democrats Support Republican Tax Cut Plan
============================================= HR 863 IH
106th CONGRESS
1st Session
H. R. 863 To require appropriate off-budget treatment of Social Security in official budget pronouncements.
IN THE HOUSE OF REPRESENTATIVES
February 25, 1999 Mr. HERGER (for himself, Mr. MINGE, Mr. BASS, Mr. PETERSON of Minnesota, Mr. SMITH of Michigan, Mr. GUTKNECHT, Mr. FRANKS of New Jersey, Mr. HOEKSTRA, Mr. BALLENGER, Mr. THOMAS, Mr. MCCRERY, Ms. WOOLSEY, Mr. CRANE, and Mr. CAMPBELL) introduced the following bill; which was referred to the Committee on the Budget, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned
A BILL To require appropriate off-budget treatment of Social Security in official budget pronouncements.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Social Security Budgeting and Investment Act of 1999'.
SEC. 2. REMOVING SOCIAL SECURITY FROM BUDGET PRONOUNCEMENTS.
Any official statement issued by the Office of Management and Budget, the Congressional Budget Office, or any other agency or instrumentality of the Federal Government of surplus or deficit totals of the budget of the United States Government as submitted by the President or of the surplus or deficit totals of the congressional budget, and any description of, or reference to, such totals in any official publication or material issued by either of such Offices or any other such agency or instrumentality, shall exclude the outlays and receipts of the old-age, survivors, and disability insurance program under title II of the Social Security Act (including the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund) and the related provisions of the Internal Revenue Code of 1986.
SEC. 3. EFFECTIVE DATE.
The provisions of section 2 shall apply with respect to fiscal year 2000 and subsequent fiscal years, except that the exclusion required under section 2 with respect to receipts shall apply--
(1) for fiscal year 2000, only with respect to the excess of total receipts over receipts consisting of interest earned on investments of the Trust Funds referred to in section 2, and
(2) for fiscal year 2001, only with respect to the excess of total receipts over 50 percent of receipts consisting of interest earned on investments of such Trust Funds. END
=============================================== ASSOCIATED PRESS
March 3, 1999
CBO faults both sides of Social Security debate
By ALAN FRAM
WASHINGTON - With sharp criticism for both sides of the Social Security debate, Congress' top budget analyst warned Wednesday that President Clinton would spend billions of the program's surpluses for other initiatives while a Republican effort to protect the money seems doomed for failure.
The fine print of Clinton's budget acknowledges that in the next few years he would use some Social Security money for other purposes.
But rhetorically, the president has emphasized that the bulk of the surpluses should be set aside to buttress Social Security and Medicare for the baby boomers' retirements. And he has accused Republicans of wanting to squander the money for tax cuts instead.
Clinton's plan would actually spend $35 billion in Social Security money in fiscal 2000, which begins Oct. 1, for other programs, according to a Congressional Budget Office report presented by CBO Director Dan Crippen to the Senate Budget Committee.
"The president of the United States is not following his admonition," said committee Chairman Pete Domenici, R-N.M., citing the CBO analysis. "He only saves some of" the Social Security trust funds.
"We're not going to spend a penny of the Social Security surplus," said Sen. Phil Gramm, R-Texas. "And we're not going to use a penny of it to cut taxes."
The administration says it would reserve the entire Social Security surplus over the next 15 years, but concedes that it wouldn't save all of it in every individual year.
"You need to look at the big picture. This is not a one-year snapshot," said Linda Ricci, spokeswoman for the White House Office of Management and Budget.
Next year's overall federal surplus would be $98 billion under Clinton's plans for using surpluses to bolster Social Security and other programs, including investing some of the money in the stock market. But without any changes in current law, the black ink would be $133 billion, CBO said.
Crippen also told the Senate budget panel that the agency has "not found a way" for lawmakers to set aside Social Security's surpluses and ensure they not be used for anything else. Any law setting aside money can be undone by subsequent laws approved by lawmakers eager to get at the money, CBO officials said.
That worry was echoed by Federal Reserve Chairman Alan Greenspan, who told another congressional panel that, regardless of any promises today, he fears politicians inevitably would be tempted to spend future budget surpluses on other things such as tax cuts or other programs.
The CBO testimony was a blow to Republicans, whose leaders have been moving toward a plan aimed at setting aside the Social Security money. House and Senate leaders want to agree to a proposal this week that would let them argue they are not using Social Security surpluses for tax cuts, hoping to deflect Clinton's attacks.
Senate Majority Leader Trent Lott, R-Miss., House Speaker Dennis Hastert, R-Ill., and others met Wednesday hoping to agree on a broad range of budget issues.
The issues included consideration of a Domenici plan requiring that Social Security surpluses be used to buy down the publicly held national debt. It would take 60 votes in the 100-member Senate to use the money for other purposes.
"You can only do what you can do," Lott said later. "And a lockbox that requires 60 votes in the Senate to get that money ... is pretty effective."
Greenspan, the Fed chairman, said the toughest challenge if lawmakers want to use surpluses today to bolster Social Security in the future is finding a way to make sure the money will actually be saved.
While he likes plans that would pay down the national debt, thereby spurring growth of the economy and increasing future tax revenues, Greenspan said it's too likely that lawmakers won't stick to those plans.
An option that might be more effective, the Fed chairman said, is to use the surpluses to set up private investment accounts. That way, individual Americans would have the money and do the saving.
========================================== THE NEW YORK TIMES
March 3, 1999
Republicans Offer a Plan to End Reliance on Social Security
By RICHARD W. STEVENSON
WASHINGTON -- Republican leaders began Tuesday to explore publicly ways to end the longstanding practice of using Social Security money for other purposes -- but not necessarily right away.
Needing money to pay for tax cuts and additional spending, House and Senate leaders discussed allowing Congress to dip into Social Security funds for the next several years but then walling off the retirement system's money from the rest of the Federal budget.
The idea of weaning the Congress from reliance on Social Security's money has more support among House leaders than among their counterparts in the Senate, many of whom favor putting the retirement system's funds off-limits immediately, Republicans said.
Removing Social Security from the budget equation entirely, though, has repeatedly proven politically impossible. Backers of the gradual approach say theirs is the only realistic way of imposing a new fiscal discipline on Congress and the White House, while still giving Republicans the wiggle room they need to propose the tax cuts and spending increases that they hope will be the centerpiece of their electoral strategy in 2000.
Although the proposal's prospects remain unclear, Republican leaders say they will have to decide soon since the question of using Social Security will go a long way toward shaping their tax and spending plans.
The House plan for gradually taking Social Security out of the budget was detailed today in legislation introduced by Representatives Wally Herger, Republican of California, and David Minge, Democrat of Minnesota, who is among his party's most fiscally conservative members.
Representative Dick Armey of Texas, the House majority leader, said the plan, though gradual, would be "a remarkable accomplishment, certainly far superior" to past efforts to keep Congress from mingling Social Security's money with general revenue.
But because it would leave their party exposed to attacks by Democrats of endangering Social Security, Republicans said they wanted to see how much bipartisan support the gradual approach might attract before making a decision on how to proceed. Democrats have rallied around President Clinton's proposal to address the same problem by reserving 62 percent of total budget surpluses over the next 15 years for Social Security.
The debate illustrated the difficulties Republicans are having reconciling their desire for new spending and tax cuts with their attempts to shore up Social Security and retain their claim to fiscal responsibility. And it brought to life the complex politics of the post-deficit world in Washington, where Democrats and Republicans each vow to be more austere than the other even as they confront the likelihood of huge and growing surpluses in the next decade.
Although the plan won support from a handful of moderate to conservative House Democrats, it drew criticism from others, including the House minority leader, Richard A. Gephardt of Missouri.
"While the general theory of taking Social Security monies out of circulation is a worthy goal, to the extent we understand their bill it's not an approach we would support," said Laura Nichols, a spokeswoman for Gephardt.
For most of the last 30 years, the Federal Government ran deficits even after spending the revenue generated by Social Security along with general revenues. Under the accounting used by the Government, the Federal budget moved from deficit to surplus last year, and is projected to remain in surplus for years to come.
But last year's surplus of $70 billion was the result of a $99 billion surplus in Social Security more than offsetting a $29 billion deficit in the Government's operating budget. Projections suggest that the Government will run an operating deficit this year and next year, and then run operating surpluses.
President Clinton's proposed budget for next year leaves the entire surplus untouched, but only by proposing tax increases and using budget maneuvers that Republicans have already rejected.
If adopted, the gradual approach to taking Social Security out of the budget could make it easier in the short run for both parties to pay for new spending they have proposed for the military and education, among other programs, and could provide Republicans with additional flexibility in financing the big tax cut that they envision as the centerpiece of their legislative agenda.
In the long run, the idea would be to make the money generated by Social Security sacrosanct, thereby making it easier for the Government to pay all promised benefits in the coming decades as the population ages. But by allowing some of the money to be spent for the next few years, the gradual approach would put Congress in the position of explicitly endorsing its longstanding practice of papering over the country's remaining fiscal problems.
The more austere proposal favored by many Senate Republicans -- to wall off Social Security immediately and completely -- would insulate the party from Democratic attacks over spending Social Security's money, but would complicate the task of drafting a budget containing spending increases and tax cuts.
Senator Pete V. Domenici, the New Mexico Republican who is chairman of the Budget Committee, is leading the effort to leave Social Security untouched. But Armey said after today's meeting that the differences were narrowing and that he expected a compromise soon.
Armey said even a phased in approach to removing Social Security from the budget would preserve more of the retirement system's money than Clinton's plan. Herger and Minge said their bill would reserve $1.69 trillion for Social Security in the next decade, while the President's plan would reserve $1.59 trillion.
Walling off Social Security would reduce the national debt, which most economists say would make it easier for the Government to pay baby boomers their retirement benefits. But both parties agree that reducing the debt alone does not fully address Social Security's problems.
The House plan for gradually taking Social Security out of the budget would separate out from the Federal budget the money earmarked for Social Security, but do it over three years in a way that would leave $89 billion in play for tax cuts or spending over the next two years.
For the coming fiscal year, the plan would wall off all $80 billion of the excess Social Security payroll taxes, but leave $51 billion in interest payments from Social Security's reserves. In the next fiscal year, the plan would wall off all the excess payroll taxes and half the interest payments, leaving a projected $38 billion for Congress to play with.
In the third year, all money derived from Social Security, both payroll taxes and interest, would be taken off the Government's books for purposes of spending and tax cuts.
In a letter to Speaker J. Dennis Hastert, Herger and Minge said they did not intend their bill to provide cover for "a final raid on the Social Security Trust Fund" for either tax cuts or spending increases.
But the practical effect of their plan would be precisely to allow the money left on the table to be used for tax cuts or spending increases. Representative John R. Kasich, the Ohio Republican who is chairman of the House Budget Committee, has generally supported the approach as he seeks to put together a tax and spending blueprint for next year.
==================================== REUTERS
Wednesday March 3, 1999
Republicans Say Readying Plan On Social Security
By Vicki Allen
WASHINGTON (Reuters) - Congressional Republicans Wednesday accused President Clinton of robbing the Social Security trust fund that he says he aims to save and said they would have a plan ready this week to safeguard Social Security surpluses.
Citing figures released by the Congressional Budget Office, Republicans on the Senate Budget Committee said Clinton's proposed fiscal 2000 budget would save $80 billion of surplus Social Security funds next year and spend $57 billion.
``The truth is the president does not save the Social Security trust fund for future use, he only saves some of it,'' Committee Chairman Pete Domenici of New Mexico told reporters after his panel heard a CBO analysis of Clinton's budget. ``My intention is that we save every penny of it.''
Democrats and Republicans have been competing to portray themselves as protectors of the retirement system that is threatened to be drained dry as baby boomers retire in 10 or 15 years.
Republican leaders said they were looking at plans to set aside $1.5 trillion over 10 years for Social Security, more than Clinton's plan to safeguard $1.33 trillion.
CBO Director Dan Crippen also told the Senate committee that the White House budget would break spending limits imposed to balance the budget by $30 billion next fiscal year, and would shrink projected budget surpluses -- most of which are in the Social Security trust fund -- by $436 billion during 2000-2004.
The White House has argued that it proposed fee increases and other revenue sources to offset additional spending and balance its budget. But the CBO said those fees have not been passed by Congress, and much of that could not be counted under its rules.
Republicans pounced on the analysis by CBO, a non-partisan arm of Congress, to say that Clinton was trying to break the 1997 balanced budget agreement that helped end years of federal red ink.
While Clinton has trumpeted his plan to save 62 percent of projected surpluses for Social Security over 15 years, Republicans said his budget for next year would spend tens of billions of dollars from the Social Security trust fund on other programs.
``He doesn't save Social Security, he raids the Social Security trust fund,'' Sen. Don Nickles of Oklahoma said.
Lawmakers for years have used surplus money from the payroll taxes paid into Social Security to help mask the size of the deficit and pay for other programs, but all that money and more will be needed for retiring baby boomers.
Clinton has proposed setting aside more money for the fund by using surpluses to pay down the national debt with a commitment the money would be repaid, which Republicans said would require raising taxes and tapping general revenue.
``He has decided that the average taxpayer out of general revenue money is going to start at some point in the future paying huge amounts of taxes into the Social Security trust fund,'' Domenici said, saying that would be a ``dramatic change.''
Instead Domenici said all Social Security funds should be made off limits immediately to other uses, a tough task as future Congresses and presidents could overturn measures to safeguard it.
===================================== THE WALL STREET JOURNAL
March 1, 1999
Some Democrats Support Republican Tax-Cut Plan
By GREG HITT
WASHINGTON-House GOP leaders want to give the patina of bipartisanship to a plan that would allow them to tap the Social Security surplus to pay for a tax cut, and some moderate Democrats appear willing to play along.
The Democrats, who number a half dozen or so, are supporting the plan in the name of reforming Social Security, since the initiative after three years would shelter Social Security surpluses that have been used to mask deficits in the rest of the federal budget. But in the near term, the change would be phased in and leave a significant pot of money on the table-about $50 billion in the coming fiscal year-to be divvied up by Republicans ahead of the 2000 election.
As currently envisioned by House GOP leaders, the money would be available for spending increases on defense and education but would be largely reserved for financing a big tax cut.
The ultimate goal is to put some distance between the GOP and the impeachment debacle. House Budget Chairman John Kasich (R., Ohio) Sunday sought to breathe new life into the GOP's coveted 10% across-the-board tax cut, emphasizing the proposal's fairness compared with the targeted tax cuts advocated by the White House, and approved in recent years by the GOP Congress. "I was the father of the targeted tax cut," Mr. Kasich, appearing on ABC's "This Week," said with some hyperbole. "But if you weren't a left-handed cab driver in New York you didn't get any tax relief. Let's make it across the board. Let's make it simple."
The issue of which taxes to cut divides Republicans but is a longer-term question for the party. Of more immediate importance is whether any of the surplus can be tapped to pay for a tax cut of any kind next year. Mr. Kasich is a leading advocate of doing so, but the move could be politically dangerous since all of the $131 billion surplus projected for fiscal 2000 comes from either excess Social Security payroll taxes or interest on the system's bond portfolio.
Mr. Kasich proposes to draw off Social Security's interest income- estimated at $50 billion-to finance the GOP's budget initiatives. Senate Republican leaders are leery, and many rank-and-file House Republicans themselves aren't yet on board. "We need to hold the line" on Social Security, said Rep. Mac Collins, a Georgia Republican who sits on both the House Budget Committee and tax-writing Ways and Means Committee.
A bipartisan plan to gradually erect a budget firewall around the Social Security surpluses provides the structure to accomplish Mr. Kasich's goal. With the GOP leadership's encouragement, the plan was developed by Rep. Wally Herger, a California Republican who spent much of the last few weeks reaching out to Democrats. The proposal would fence off only payroll-tax surpluses next year. In 2001, the firewall would be widened to cover half of Social Security's interest income. By 2002, all Social Security funds- interest income as well as payroll taxes-would be protected.
Among the half dozen or so Democrats supporting the plan are Minnesota Reps. David Minge and Collin Peterson, as well as California Democrat Lynn Woolsey. Their position puts them at odds with House Democratic leaders. They emphasize that their interest is in protecting Social Security, though Mr. Peterson acknowledged the initiative-if incorporated into the budget-"makes it easier" for the GOP to do a tax cut. "To take the trust fund all off in one year makes it hard to do things," Mr. Peterson said.
Debate on the issue is fluid and no final decisions have been made.
Even Mr. Herger displayed some discomfort with the idea that his proposal would open the door for Social Security funds to pay for tax cuts. "I'm going to let other people decide that," Mr. Herger said, noting his "first preference" would have been to immediately protect all of the surplus associated with Social Security. "Am I for using any of that for tax reduction? No, I am not."
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