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GOP Attacks New Social Security Plan

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  • By George Hager
    Washington Post Staff Writer
    Wednesday, February 3, 1999; Page A4

    Senior White House officials who went to Capitol Hill yesterday for the ritual defense of the president's new budget proposal got an earful from Republican senators who attacked President Clinton's plans for Social Security as budget gimmickry.

    Although the fiscal 2000 budget the president unveiled Monday contained thousands of spending and tax proposals, senators all but ignored almost everything except White House plans for Social Security and tax cuts, both of which they found wanting.

    During simultaneous hearings of the Senate's Budget and Finance committees, numerous GOP senators praised Clinton's plan to devote the Social Security surplus to paying down the national debt. But they sharply attacked the way Clinton planned to account for that transaction, insisting he was spending the same money twice and signaling that the cornerstone of the White House's Social Security fix may be in deep political trouble.

    "Your accounting is beyond my comprehension," Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) told White House Budget Director Jacob "Jack" Lew at the committee yesterday. "How can you save Social Security and do nothing to Social Security?"

    Lew said the Social Security proposal was a way to "lock in" use of the surplus for debt reduction by giving the Social Security program first call on budget resources freed up as a result. "We think that's the right thing to do," he said.

    The exchange between Lew and Domenici offered a view of one of the most important policy debates on Capitol Hill this year, as lawmakers scramble to find a way to shore up Social Security so they can move on to tax cuts, extra defense and domestic spending and other issues that energize both parties.

    The White House plan offers Congress an all but painless way to extend the life of Social Security by almost two decades, lessening the need for tough fixes such as benefit cuts. But Republicans charge that the White House fix makes no actual change to Social Security's finances and avoids necessary changes to the program. Perhaps more significant, it also could hamper GOP plans to carve off part of the program for individual investment accounts.

    The very complexity of the White House plan has been a huge obstacle to its acceptance on Capitol Hill, even among some Democrats. Essentially, the White House proposes to take trillions of dollars in excess Social Security payroll taxes over the next 15 years, credit them to the Social Security trust funds in the form of special Treasury bonds as is now routinely done, and then use the cash to begin to retire the nation's $3.7 trillion publicly held debt.

    So far, so good, in the view of even the administration's critics, because retiring part of the debt would give the economy a boost while cutting the amount of money the federal government pays every year in interest. It is the next step that is controversial.

    Upon paying off part of the debt, the administration would then credit back to the Social Security program a second set of Treasury bonds in roughly the amount of the retired debt. Some budget analysts insist the plan makes sense, because the government is effectively restructuring debt by moving it out of public hands and into government accounts.

    But Republicans see trickery, insisting the White House is trying to make double use of the same money. Sen. Don Nickles (R-Okla.) told Treasury Secretary Robert E. Rubin in the Finance Committee hearing that the proposal "to artificially credit the Social Security surpluses twice . . . is not going to fly. It's so deceiving."

    Even some Democrats are skeptical. "You're not increasing the assets of the Social Security system, you're increasing the debt," Sen. Ernest F. Hollings (D-S.C.) told Budget Director Lew. "You're double-counting. That's where you're getting the money."

    Rubin defended the plan in the Finance Committee, saying it would "preserve and invest the surplus, rather than eliminate the surplus through tax cuts or spending."

    And some Democrats tried to come to the administration's aid. Sen. Kent Conrad (D-N.D.) compared the practice to a bank receiving a depositor's money and then lending it out in the form of a mortgage a routine transaction. He also noted that no one complains about double-counting the Social Security surplus when it is used to make up for deficits in the rest of the budget and pay general day-to-day government expenses.

    Killing Clinton's plan could hurt Republicans' chances to move on to tax cuts, the subject they would much rather debate this year. Administration officials have repeatedly warned that they will not budge on how to spend the non-Social Security surplus until Social Security is fixed.

    But both Monday and yesterday, officials signaled that they may be flexible if that day ever does come. While the administration has laid down its own plan for a surplus-funded tax cut a proposal to use the tax code to provide most Americans with 401(k)-style retirement accounts officials said they were open to other ideas.

    Senior White House officials who went to Capitol Hill yesterday for the ritual defense of the president's new budget proposal got an earful from Republican senators who attacked President Clinton's plans for Social Security as budget gimmickry.

    Although the fiscal 2000 budget the president unveiled Monday contained thousands of spending and tax proposals, senators all but ignored almost everything except White House plans for Social Security and tax cuts, both of which they found wanting.

    During simultaneous hearings of the Senate's Budget and Finance committees, numerous GOP senators praised Clinton's plan to devote the Social Security surplus to paying down the national debt. But they sharply attacked the way Clinton planned to account for that transaction, insisting he was spending the same money twice and signaling that the cornerstone of the White House's Social Security fix may be in deep political trouble.

    "Your accounting is beyond my comprehension," Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) told White House Budget Director Jacob "Jack" Lew at the committee yesterday. "How can you save Social Security and do nothing to Social Security?"

    Lew said the Social Security proposal was a way to "lock in" use of the surplus for debt reduction by giving the Social Security program first call on budget resources freed up as a result. "We think that's the right thing to do," he said.

    The exchange between Lew and Domenici offered a view of one of the most important policy debates on Capitol Hill this year, as lawmakers scramble to find a way to shore up Social Security so they can move on to tax cuts, extra defense and domestic spending and other issues that energize both parties.

    The White House plan offers Congress an all but painless way to extend the life of Social Security by almost two decades, lessening the need for tough fixes such as benefit cuts. But Republicans charge that the White House fix makes no actual change to Social Security's finances and avoids necessary changes to the program. Perhaps more significant, it also could hamper GOP plans to carve off part of the program for individual investment accounts.

    The very complexity of the White House plan has been a huge obstacle to its acceptance on Capitol Hill, even among some Democrats. Essentially, the White House proposes to take trillions of dollars in excess Social Security payroll taxes over the next 15 years, credit them to the Social Security trust funds in the form of special Treasury bonds as is now routinely done, and then use the cash to begin to retire the nation's $3.7 trillion publicly held debt.

    So far, so good, in the view of even the administration's critics, because retiring part of the debt would give the economy a boost while cutting the amount of money the federal government pays every year in interest. It is the next step that is controversial.

    Upon paying off part of the debt, the administration would then credit back to the Social Security program a second set of Treasury bonds in roughly the amount of the retired debt. Some budget analysts insist the plan makes sense, because the government is effectively restructuring debt by moving it out of public hands and into government accounts.

    But Republicans see trickery, insisting the White House is trying to make double use of the same money. Sen. Don Nickles (R-Okla.) told Treasury Secretary Robert E. Rubin in the Finance Committee hearing that the proposal "to artificially credit the Social Security surpluses twice . . . is not going to fly. It's so deceiving."

    Even some Democrats are skeptical. "You're not increasing the assets of the Social Security system, you're increasing the debt," Sen. Ernest F. Hollings (D-S.C.) told Budget Director Lew. "You're double-counting. That's where you're getting the money."

    Rubin defended the plan in the Finance Committee, saying it would "preserve and invest the surplus, rather than eliminate the surplus through tax cuts or spending."

    And some Democrats tried to come to the administration's aid. Sen. Kent Conrad (D-N.D.) compared the practice to a bank receiving a depositor's money and then lending it out in the form of a mortgage -- a routine transaction. He also noted that no one complains about double-counting the Social Security surplus when it is used to make up for deficits in the rest of the budget and pay general day-to-day government expenses.

    Killing Clinton's plan could hurt Republicans' chances to move on to tax cuts, the subject they would much rather debate this year. Administration officials have repeatedly warned that they will not budge on how to spend the non-Social Security surplus until Social Security is fixed.

    But both Monday and yesterday, officials signaled that they may be flexible if that day ever does come. While the administration has laid down its own plan for a surplus-funded tax cut -- a proposal to use the tax code to provide most Americans with 401(k)-style retirement accounts -- officials said they were open to other ideas.

    © Copyright 1999 The Washington Post Company

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