John King: Political fallout of borrowing from Social Security

CNN Senior White House Correspondent John King discusses the shrinking budget surplus and the political fallout if Republicans tap the Social Security surplus.

Q: What are the political ramifications if the Bush White House has indeed been dipping into Social Security?

KING: Democrats will rush to accuse the president -- and his fellow Republicans -- of breaking a major campaign promise if the government has to tap into Social Security money to pay its bills.

The White House says this doesn't have to happen: That if Congress shows restraint when it comes to spending, that the government can end the year with a modest $1 billion "non-Social Security" surplus. But we won't know for a few months whether the Congressional Budget Office or the White House Office of Management and Budget is more correct in its estimates -- and that will depend mostly on the strength of the economy in the months ahead and the spending decisions made by Congress and the Bush administration.

Q: Is the Social Security surplus really threatened, or is this politically driven?

KING: The Social Security surplus is certainly "threatened" in the short-term. The government has done this before, and keeps on the books how much it "owes" Social Security.

But certainly the combination of the tax cut and the slowing economy has left Washington very close to running a general Treasury deficit and needing to tap Social Security money to pay its bills. The CBO analysis suggests the government will have no choice but to do so -- to the tune of $9 billion this year and then again, two years down the road, by as much as $18 billion.

Q: What's the administration's take on the issue: Do they maintain that Social Security is hands-off? What's caused the budget surplus to shrink so badly?

KING: The administration has said it will be unnecessary to tap into Social Security, but has softened that line of late as it has become apparent it was a possibility. Now, the president says he would tap Social Security only in the case of war or recession, and administration officials say if the government had to reach into Social Security for a modest amount it would have no significant effect on the retirement program.

As for the cause, two big things: the Bush tax cut and the "rebate checks," and an economy that is much more anemic than many had predicted. Tax revenues are directly related to the strength of the economy, so when the economy slumps, the government takes in less.

Q: Will seniors still get their payments?

A: No one on Social Security need worry. There would be no impact on benefits if the government does have to tap into Social Security, and in fact the government has "borrowed" Social Security money routinely in the past.

The reason this is such a high-profile political issue is that in the booming surpluses of the final years of the Clinton administration, politicians in both parties were riveted by the political appeal of promising to never again tap Social Security money to pay the government's day-to-day bills. What seemed like an irresistible political promise in good economic times is turning out to be a problematic promise in these days of a slowing economy.

But Mr. Bush insists he welcomes this debate, maintaining his tax cut was the right idea -- the right thing to do to try to stimulate the economy and return surplus funds to taxpayers, and that the debate ahead is worth having because Washington needs to take a tough look at spending priorities.

This issue will dominate the fall budget battle and likely carry over into the 2002 congressional campaign.