Balanced budget may require $10 billion from Social Security

Bush: "Any American out of work is too many Americans out of work."

From Jonathan Karl
CNN Washington Bureau

WASHINGTON (CNN) -- Despite vows not to touch Social Security funds, the White House budget director Friday informed Republicans on Capitol Hill that it will take at least $10 billion from the Social Security surplus to balance the budget, CNN has learned.

GOP congressional sources familiar with the talks said Mitch Daniels met with House Republican leaders at the office of House Speaker Dennis Hastert, R-Illinois, at 9 a.m. to tell them the news.

This, combined with new unemployment figures at 4.9 percent Friday morning, set off a furious round of meetings on both sides of Capitol Hill and ultimately led to an emergency Oval Office meeting with Republican leaders.

Daniels told lawmakers that the economic slump is forcing the government to borrow from the Social Security surplus -- something both President Bush and lawmakers on both sides of the aisle have vowed not to do.

RESOURCES • Transcript: Bush's speech on the economy   • Transcript: Gephardt's comments on economy talks   • Message Board: Taxing and spending: Bush budget      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 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.

Although the White House would not release the exact amount of the Social Security surpluses being spent, several GOP congressional sources said the new White House figures show the government could tap about $10 billion. Others said it would be up to $15 billion before the end of the fiscal year ending September 30th.

Despite Daniels' announcement earlier in the morning, Bush reiterated his promise not to touch Social Security funds Friday afternoon at a news conference with Hastert and Senate Republican Leader Trent Lott, R-Mississippi, at his side.

"We've got a plan to get our economy moving so Americans can find work," he told reporters. "It starts by having a responsible budget that meets our nation's obligations without affecting Social Security or dipping into Social Security."

Behind the scenes, administration officials and Republican members of Congress are trying to help the president keep his promise. Recognizing their vulnerability on the issue, GOP lawmakers, who must face voters next year and worry about retaining their slim majority in the House and regaining control of the Senate, are discussing a wide-range of options to avoid using the Social Security surplus figures.

Among those options are across-the-board spending cuts that would be triggered if Social Security surpluses were being used to fund government programs.

GOP aides are also discussing borrowing money from the 2002 budget in order not to dip into Social Security money. But they are concerned that Democrats in the Senate will vote against such a plan and call it a budgetary trick.

The Democratic National Committee is already working on advertisements that accuse Bush of breaking his promise not to spend the Social Security surplus.

A spokesman for Senate Majority Leader Tom Daschle, D-South Dakota, said they would have no comment on any of the ideas being floated to avoid using the Social Security funds.

"We're not responding to trial balloons, we're looking for the president to take responsibility and present a serious proposal," he said.

Republicans in Congress, most of whom are up for re-election next year, are mulling additional proposals to stimulate the economy, such as a capital gains tax cut.

As the economic slump eats into the surpluses, Democrats have tried to put the blame squarely on the Bush administration's tax cut, and have increased calls for him to find a solution.

The Senate Democratic leader even linked Bush's budget to increasing unemployment.

"I'm increasingly concerned by the reaffirmation of our worst fears of the impact that this budget is having on the economy and on working families all over this country. You can clearly make the connection between unemployment and the budgetary circumstances we're facing. And I think everybody needs to understand that," Daschle told reporters.

White House officials maintain that the slowing economy began 14 months ago under former President Bill Clinton's tenure. The 2001 budget was drafted by the Clinton administration and approved by a Republican-majority Congress. The White House officials stand by Bush's tax cut plan as the way to provide an economic stimulus.

Capitol Hill Producers Dana Bash and Ted Barrett contributed to this report.