Republican congressional leaders committed themselves Thursday to a broad budget plan to cut taxes, reduce spending and prevent the government from using the Social Security trust fund to pay for current operations, as it has for a generation.
They gave no numbers on the size of their proposed tax cut but said it would amount to a modest reduction in 2000, then grow to what they called “historic” and “substantial” proportions as projected federal surpluses materialize in 2002 and beyond.
The agreement counters President Clinton’s proposal that 62 percent of future budget surpluses be set aside for Social Security and unites the congressional Republican leadership behind a single proposal.
Last year, Republicans were sharply divided on tax and spending cuts and ultimately compromised with Clinton. Many GOP members felt the lack of a plan led to Republican losses in the mid-term elections.
The leaders now have to sell their plan to the GOP rank-and-file and then write it into a budget resolution that they hope to get through Congress by mid-April.
The GOP leadership, led by House Speaker Dennis Hastert (R-Ill.) and Senate Majority Leader Trent Lott (R-Miss.), decided to stick with 1997 spending limits under the balanced-budget agreement as they put together the new budget.
To live within these restraints, said former Congressional Budget Director Robert Reischauer, Republicans will be forced to make some large cuts in programs that may not be politically palatable. He predicted that, before the year is over, the GOP probably will have to relent and ease the annual limits on spending.
Rep. John Porter (R-Ill.), chairman of a House Appropriations subcommittee that deals with most domestic social spending, said the leaders’ plan to abide by the limits is not realistic and will have trouble garnering enough support for passage, as members resist cuts in their favorite programs.
In unveiling the broad outlines of the Republican plan, the chairmen of Congress’ two budget committees, Rep. John Kasich (R-Ohio) and Sen. Pete Domenici (R-N.M.), said the party’s plan on Social Security is far superior to the president’s proposal that 62 percent of future budget surpluses be set aside for the government program for retirees.
The GOP would seek to “wall off” the Social Security trust fund, where payroll taxes paid by working Americans are deposited. Under current law, the government can borrow this money to help finance the deficit by giving the trust fund low-interest IOUs.
Critics long have claimed that this practice amounts to a government raid of the trust funds. When the Baby Boom retires, they say, the Social Security system will try to redeem these IOUs, requiring big tax increases to pay for them.
“We don’t have any surplus in the trust fund,” said Sen. Peter Fitzgerald (R-Ill.). “It’s really just accounting gimmickry.”
The trust fund would be untouchable over the next 10 years if the GOP leaders have their way, setting aside $1.8 trillion. This proposal to create a “lockbox” for the Social Security trust fund also would enable the government to pay down the national debt, the two budget chairmen said.
The leaders did not endorse a specific tax-cut proposal although a Senate Budget Committee official said that, in addition to individual tax reductions, the GOP is interested in proposals that would generate revenue. He mentioned cutting the capital gains tax.
Under their plan, any tax cut would be financed by a surplus in the government’s general operating fund, which this year will run a small $4 billion deficit. To make room for any tax reduction and live within spending limits, the GOP would have to find offsetting spending cuts.
In fiscal 2000, said Domenici, the government will have $550 billion available to spend for defense and 2,800 domestic programs. “We’re going to be able to live within that,” he said. “We’re going to make it fit.”
Domenici and Kasich also said that, under the budget framework approved by the leaders, Republicans would set aside more money for Social Security and Medicare than would Clinton.
Both chairmen said the president’s budget would preserve only 58 percent of future surpluses for Social Security. They also said that the Clinton budget would violate the spending caps by $30 billion.
Reischauer said neither the White House nor Republicans wanted to be first in announcing that they were breaching the 1997 spending limits because to do so would signal easing up on fiscal discipline.
Although economists are projecting huge budget surpluses in the next decade, austerity is still in vogue on Capitol Hill.
“There is a feeling that we have achieved something no one thought possible 24 months ago,” said Sen. Dick Durbin (D-Ill.). “We don’t want to blow it.”
