Budget on tap for returning senators

Sen. Dick Durbin, D-Illinois, reconvenes the Senate after the summer recess.

WASHINGTON (CNN) -- The Senate reopened for legislative business Tuesday, as returning lawmakers faced a political landscape transformed during their month-long summer recess by discouraging economic numbers and projections of a rapidly shrinking federal budget surplus.

Sniping over the state of the federal budget got under way as soon as the opening gavel sounded on the Senate floor, bringing the chamber to order for the first time in more than four weeks. Through the day, Republican and Democratic senators dug in for what is expected to be a contentious month of partisan haggling over whether the government can afford all the spending priorities outlined by President Bush earlier in the year.

Members of the Democratic majority, armed with tighter budget projections, charged that the Bush administration is using funds from the Social Security surplus to pay for additional spending, including an $18.4 billion boost for defense in fiscal 2002, which begins October 1.

What's in a 'surplus'? The U.S. figures its annual bottom line by including all tax revenues - including taxes that can only be used to pay Social Security benefits. If revenues fall short, the government has customarily borrowed from Social Security. Here's the math behind the Congressional Budget Office prediction: $153 billion = Total budget surplus $162 billion = Off-budget surpluses* $9 billion = Shortfall *Includes Social Security trust funds as well as the net cash flow of the Postal Service EXTRA INFORMATION How Social Security works     RESOURCES • Message Board: Taxing and spending: Bush budget   • White House Budget Report (pdf)   • Congressional Budget Office report (pdf)   Documents in PDF format require Adobe Acrobat Reader  for viewing.   What's the impact? If Congressional Budget Office estimates are correct and the government needs to borrow from the Social Security trust fund, here are the effects of the move: Social Security benefits are not affected. Money taken out of the trust fund would be credited to the Social Security account. It could slow down the pace of paying off long-term debt.

"The message ought to be; 'keep your hands off these trust funds,'" said Sen. Byron Dorgan, D-North Dakota, adding: "It seems to me the president is going to have to come to Congress…and say here's the plan by which were going to pay for that. And that plan ought not to include raiding the Social Security trust fund."

Bush and GOP leaders have countered that the surplus can be protected if Congress keeps its spending in check. In recent weeks, Bush and fellow Republicans have said critics who question his handling of the budget, and in particular his $1.35 trillion tax cut, may be looking to raise taxes.

The president emerged from a midday meeting with Senate Minority Leader Trent Lott, R-Mississippi, and repeated those themes to reporters.

The government has "ample money," he said, despite the yearlong economic slowdown. "Congress is going to just have to adjust their appetites and realize they can't spend their way out of town."

Daschle seeks no specifics -- yet

Senate Majority Leader Tom Daschle also met with Bush on Tuesday to discuss the budget. Daschle, D-South Dakota, described the meeting as cordial, and said he did not go in looking for specifics as to how the president would address a variety of budget questions.

"This is not a spending problem on the part of Congress," he said, speaking with reporters outside the White House. Rather, Daschle said, Democrats believe the tax cut is the key threat to the Social Security surplus.

"Our view is that the tax cut is in large measure the reason why over the next several years we are threatened in terms of the real possibility that we could be in Social Security and using the trust fund. That's our concern," Daschle said.

But, he said, he is not advocating rolling back the 10-year tax cut.

Daschle and other Democratic leaders have called on Bush to revise his budget proposal in light of new numbers from the Congressional Budget Office, which show a 44 percent reduction in surplus estimates from earlier this year. The CBO predicts that $9 billion will have to be taken from the Social Security trust fund to cover spending.

At a Senate Budget Committee hearing Tuesday afternoon on the new CBO numbers, much of the discussion focused around the use of money from the Social Security and Medicare trust funds to pay for current expenses.

CBO Director Dan Crippen said the retirement program's long-term solvency is dependent on economic realities, rather than on budget maneuvers. "Ultimately, the trust fund is the economy," Crippen said.

Yet Sen. Kent Conrad, D-North Dakota, the Budget Committee Chairman, argued that using the Social Security surplus can affect the program's long-term solvency because it means less money is available to pay down federal debt. "To the extent you don't pay down the debt as much, that means less savings, less investment, less economic growth," Conrad said.

Meanwhile, Sen. Pete Domenici, R-New Mexico, defended the Bush budget, saying the fiscal tightness is the result of the economic slowdown. And he discounted Democrats' dire predictions. "No matter what is said, the federal government's books -- its budget -- is in much better shape than the American economy."

A contentious autumn session

The debate over the budget will likely consume much of Congress' time in September, with action required on the 13 annual appropriations bills for the coming fiscal year. The House of Representatives reconvenes Wednesday.

In August, the White House and the non-partisan CBO both predicted deep drops in the size of the federal budget surplus, but the White House maintains that no monies will have to be skimmed from Social Security to cover other obligations.

Democrats seized on the CBO's projected use of the Social Security surplus, charging that the administration is reneging on a campaign promise by Bush to not touch those funds -- a pledge also made by both Democrats and Republicans in Congress. Bush, the Democrats said, has been reckless in his handling of the nation's finances.

Republicans, however, have defended the president's budget. While some Democrats have questioned the Bush tax cut in light of the economic slowdown -- now a year old -- Republicans have suggested that additional tax cuts could be needed to stimulate growth. In particular, they have discussed cutting the capital gains tax.

Bush on Tuesday said he was "open-minded" about a cut in the capital gains tax, but he said he wanted to wait until the full effects of the current tax cut are evaluated, and did not issue an endorsement. "What I'd like us to do is take a look-see to make sure that he stimulus package that we now are implementing works."