House bounds into budget-surplus tangle

By Manuel Perez-Rivas, CNN Washington Bureau

WASHINGTON -- Republicans and Democrats resumed their sparring over the nation's finances Wednesday, as the House of Representatives met for the first time in more than a month -- with the budget its first order of business.

Members of the two parties expressed sharply different views of the state of the federal government's accounts during a Budget Committee meeting, in which lawmakers went over the worrisome reports of a shrinking federal surplus that came out while Congress was in its August recess.

Much of the hearing centered on the surplus, and in particular the possibility that the federal government may have to use revenues from Social Security to cover its spending.

Democratic lawmakers repeatedly questioned White House budget director Mitchell Daniels about congressional projections that the president's budget will require the use of billions of Social Security dollars in three of the next four years.

The White House Office of Management and Budget, Daniels' place of employ, has predicted the president's budget will not require the use of those funds, but will avoid using them by razor-thin margins in the next few years.

Rep. John Spratt, the South Carolinian who is ranking Democrat on the Budget Committee, noted that when Congress left for its month-long recess, the discussions on the Hill were about such things as a new prescription drug plan for retirees, increasing defense spending, education reform, and aid for farmers.

"What we've got now is a situation where none of this is easily possible," Spratt said.

But Daniels stood by OMB's estimates that the federal government will not have to use the Social Security surplus if Congress does not add more spending to the president's budget request.

Politics and promises

The issue is politically significant because President Bush and members of Congress have pledged not to use the Social Security surplus for excess spending, but rather to devote that money exclusively to paying down national debt.

That is a relatively new practice. For decades, the federal government routinely used the retirement surplus to cover other obligations. Out of concern for the long-term viability of the retirement program, lawmakers pledged to put the Social Security surplus aside a few years ago, when the federal budget finally went into surplus.

Keeping that pledge, however, could be a challenge now that the surplus is shrinking.

In recent weeks, Bush has said he will continue to abide by the pledge. But he has said Social Security surplus monies could be used in a recession or during wartime.

On Wednesday, Daniels reiterated that the president's budget would not dig into the Social Security surplus. Yet, he made it a point to note that the surplus does not have a direct bearing on benefits to retirees, nor does it have an effect on the size of the Social Security trust fund.

"All we do with the extra doesn't go into a mattress….doesn't go into some special box locked or unlocked. It goes to pay debt to the extent we can. That's it," Daniels said.

"And the Social Security trust fund in 2010 will be exactly the same size as it would be if there had never been a tax cut, or if there had never been a rebuilding of our defense. They're completely unrelated."

What will affect the long term viability of Social Security, Daniels said, will be economic growth and reform of the retirement program -- an effort Bush is looking to undertake.