Congress Considers Borrowing Money from Social Security to Extend Tax Breaks

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House and Senate leaders are hoping to overcome some disagreements so that they can appoint conferees and finalize a budget plan before the middle of May. Democratic leaders in both the House and Senate initially proposed budget plans that would supposedly produce a budget surplus by 2012. The Senate plan was amended before it was passed, at the urging of Max Baucus (D-MT), to spend that alleged surplus on tax breaks and, to a much lesser degree, on expanded children's health care.

Members of the House passed their plan without any such amendment. Now the two budget proposals must be reconciled and the House must decide whether to accept the Baucus amendment in the final budget plan. Few have noted that the surplus they're talking about doesn't really exist. The "surplus" money that would be spent on tax cuts and so forth would really be taken from funds that are supposed to be used to shore up Social Security.

In 2012, the Social Security surplus, which is supposed to be separate from the rest of the federal budget, is projected to be $248 billion. The Senate budget plan, as initially proposed, would produce a surplus of $132 billion in 2012 - but that includes the Social Security surplus. So clearly the federal government is relying on the Social Security surplus to stay in the black. If the Baucus amendment is adopted in the final budget, that would essentially mean the Social Security surplus is being spent, mostly on tax cuts.

Of course the House and Senate budget plans are far more responsible than the President's since at least they revive the "pay-as-you-go" rule, or PAYGO, which helped us balance the budget in the 1990s. But the Baucus amendment, if adopted in the final budget, will be a pledge to waive PAYGO to spend the projected "surplus" that's supposedly coming in 2012.

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