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White House Finds 'Extra' $4.3B

The Bush administration will argue in a revision of the federal budget surplus that a simple accounting change produced an unexpected $4.3 billion this year for additional spending or tax cuts.

The money was found in the Social Security accounts, but administration officials say the revision leaves the Social Security Trust Fund sacrosanct.

The increase could be critical politically. The White House and its Republican allies in Congress face persistent Democratic charges that President Bush's tax cuts have drained too much of the surplus to meet government spending priorities.

Even with the change, the revised surplus projections for the fiscal year ending Sept. 30 will certainly be much lower than the administration or Congressional Budget Office foresaw early this year.

In January, the surplus, excluding extra monies from Social Security, was pegged at $125 billion, reports CBS News Chief White House Correspondent John Roberts. Since then, $74 billion went to the tax cut; the economic slowdown took out $40 billion more. What's left is precious little to meet spending priorities without busting the budget and plunging into the Social Security surplus for the first time in three years.

The new $4.3 billion would brighten that picture somewhat, especially for Republicans who have staked much politically on preventing Social Security from being tapped for other government spending. The accounting change would essentially shift the $4.3 billion from the sensitive Social Security side of the ledger to the side available for spending or tax relief.

Administration officials denied the move was made to give the president a fiscal and political cushion.

"This is a more accurate way of accounting," said White House spokesman Ari Fleischer. "This is the way it should be done if you want accuracy to be your guide, like any good business would do."

But Democrats, who had hammered the president for jeopardizing the surplus with his huge tax cut, denounced the change as an unprecedented accounting gimmick meant to rescue Mr. Bush from a political embarrassment.

"They are changing a rule that everyone has lived by for 65 years at the last moment solely to cover up a serious political problem," said Gene Sperling, who was President Clinton's top economic adviser.


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Seeking to heighten the budget pressure on the president, Senate Majority Leader Tom Daschle of South Dakota, House Minority Leader Dick Gephardt of Missouri and other Democrats sent Mr. Bush a letter Wednesday claiming the coming budget revisions will clearly demonstrate the threat to Social Security and Medicare.

"We face the very real prospect that your tax cut, coupled with an economy that is slowing significantly, will have exhausted all of the surplus n the near term and leave no way to fund other functions of government without tapping into Medicare and Social Security," the Democrats wrote.

The White House shot back that there would still be a surplus this year, despite the Democrats best efforts to spend it all now.

"Even with the weakening economy, the president's budget will produce the second-largest surplus in the history of the country," Fleischer said.

Administration officials said the accounting changes involve properly crediting to Social Security the payroll tax revenues for 1998, 1999 and 2000, which effectively reduces the trust fund's surplus in 2001 by $5.6 billion.

The administration is making one other change involving the Postal Service, which is usually lumped in with Social Security for budget purposes. The change would separate the Postal Service account, which is running a $1.3 billion deficit this year. That would have to be made up out of the spending side of the ledger.

Combining the two changes would result in a fiscal 2001 surplus, excluding Social Security, that is $4.3 billion larger than it would have been otherwise. It also makes the Social Security surplus appear smaller than it would have been.

The White House Office of Management and Budget plans next week to include the revisions in its new budget outlook for 2001, which will show the impact of $38 billion in tax cut checks and lower tax revenues because of the sluggish economy.

The CBO, which produces the budget estimates Congress must live by, also is expected to issue new projections before the end of August.

©MMI, CBS Worldwide Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report

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