Bush budget move reignites Social Security debate

WASHINGTON (CNN) -- A change in the way the Bush administration calculates payroll taxes revived the Social Security debate Thursday, with congressional Democrats calling the move a gimmick meant to hide the impact of the Bush tax cut on the Social Security surplus.

Administration officials said the change is intended to reflect a more accurate accounting of available funds, freeing up billions of dollars in revenue and allowing President Bush to keep his promise not to touch Social Security surpluses.

"The president's budget fully protects Social Security," said White House press secretary Ari Fleischer. "It protects it this year and in future years as well."

EXTRA INFORMATION • How Social Security works   • On the Scene: CNN's Major Garrett explains Bush's 'new accounting'

Senate Majority Leader Tom Daschle, D-South Dakota, said in a statement the move is a tacit admission "that [the administration's] tax cut has not only used up this year's entire Medicare surplus, but may eat into the Social Security Trust Fund as well.

"Right now, we don't need to shuffle numbers, we need an honest assessment of our fiscal situation, and a renewed commitment on the part of this administration to protecting Social Security and Medicare," Daschle said.

Fleischer said the Office of Management and Budget, which crunches numbers for the White House, will change the way the government counts payroll taxes.

The change affects quarterly Treasury Department estimates of how tax revenue is allocated. Businesses send taxes in lump sums and it is the government's job to distribute the taxes to Social Security, Medicare, unemployment benefits and other government accounts.

The Treasury Department estimates how much revenue goes where on a quarterly basis and those estimates are checked for accuracy once a year.

Now, the OMB will check the estimates twice a year: once when the budget is submitted and again during the so-called mid-session review, which the OMB will publish Wednesday.

Essentially, OMB will say the Social Security Trust Fund should have been credited with much more money than it was during 1998, 1999 and 2000.

"In other words," Fleischer said, "Social Security had been shortchanged."

A spokeswoman for OMB said this is the first time in history the agency has changed its method of calculating payroll tax revenue.

The number crunching will add an extra $5.6 billion in revenue, but another accounting change will move $1.3 billion in surplus revenue from Postal Service operations out of the Social Security surplus.

Amy Call, an OMB spokeswoman, said the Postal Service usually runs an operating surplus and Congress and previous administrations have added it to the off-budget surplus operations.

(The Social Security and Medicare trust funds are characterized as "off budget," meaning lawmakers and the administration face restrictions if they want to use the money for other government spending. The term "off-budget surplus" is used by many budget analysts and reporters interchangeably with the term "Social Security surplus.")

"But this year there is a loss, and we wanted to show the most accurate Social Security surplus number possible," Call said.

That leaves a net of $4.3 billion that Congress can spend or devote to tax cuts without touching the projected $157 billion Social Security surplus this year, Fleischer said.

"There has never been a need to look at the Social Security surplus this closely," Call said. "There's such a heightened debate that we should have the most accurate number possible."

The surplus does not affect Social Security benefits to current recipients, but it is highly symbolic and politically charged. Both Democrats and Republicans have sought to claim the high ground as protectors of the surplus.

Democrats, who long have criticized the president's 11-year, $1.35 trillion tax cut as a threat to fiscal stability, believe the change is a way for the Bush administration to cook the books.

"Basically, this is a budget gimmick designed to hide the fact that the tax cut is raiding Medicare and the Social Security surplus," said Tom Kahn, the Democratic staff director for the House Budget Committee.

"It is quite remarkable that after only seven months in office the Bush administration is poised to raid both the Social Security and Medicare trust funds," said Senate Budget Committee Chairman Kent Conrad of North Dakota.

"The Bush administration has authored a budget and tax plan that does not add up and that will hurt our country. Now it is resorting to cooking the books to hide what it has done. But no accounting gimmick can conceal it," Conrad said.

Rep. John Spratt of South Carolina, the ranking Democrat on the House Budget Committee, said he thought the OMB move was a "gimmick" but struck a more conciliatory tone.

"I'm not saying I can't go with this particular procedure," Spratt said. "We have left this to be worked out between Treasury and the Social Security Administration in the past, and possibly we may say in the future it shouldn't be handled this way."

On Wednesday, Daschle, House Minority Leader Dick Gephardt of Missouri and others sent Bush a letter warning that the budget revisions will show Social Security and Medicare are endangered.

"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 in the near term and leave no way to fund other functions of government without tapping into Medicare and Social Security," they wrote.

The new numbers will appear in OMB's mid-session review, the first White House assessment of the surplus and fiscal trends since enactment of the Bush tax cut.

The Congressional Budget Office, taking a different approach, is expected to show later in August that government spending this year will encroach on Social Security.

Fleischer did not dispute the potential for disagreement between the OMB and the Congressional Budget Office.

"But if Congress has any concerns, it should look first to their over spending appetites," Fleischer said. "Congress should not do anything that would risk Social Security."

Fleischer said Congress and President Clinton boosted spending in the previous fiscal year by $34.5 billion over what the GOP-led Congress had originally approved.

"They held hands, Democrats and Republicans and President Clinton, and spent beyond what it should," Fleischer said.

-- CNN White House Correspondent Major Garrett and CNN Radio Correspondent John Bisney contributed to this report.