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Budget Office Predicts Slow Growth, Dwindling Surplus

By Glenn Kessler

The federal government is on target to spend billions of dollars in payroll taxes collected for Social Security on other government programs during the rest of George W. Bush’s term, according to a pessimistic congressional report that foreshadows fierce battles over how to allocate the nation’s dwindling budget surplus.

Politicians in both parties have repeatedly pledged to devote the surpluses generated by Social Security to pay down the national debt. The report by the Congressional Budget Office disputes a rosier White House forecast issued last week that suggested the government would just avoid crossing the line into Social Security in coming years.

The CBO concludes that in the wake of the tax cut and the slowing economy, the government will tap about $9 billion of the Social Security surplus in the fiscal year that ends Sept. 30. The government appears to have virtually no surplus outside Social Security in 2002, then is projected to use $18 billion in 2003, even before additional spending for education or defense sought by both parties is considered, the CBO said.

Taken together, the two reports show the budget surplus is dwindling much faster than analysts had expected just four months ago, when estimates were last released. That calls into question whether Congress will find the money to enact such big-ticket items as a prescription-drug benefit, a missile defense system and Social Security reform. Moreover, the reports could put pressure on Congress to scale back the 13 spending bills for the fiscal year that starts Oct. 1.

The overall surplus, including Social Security, will be $153 billion in 2001, a decrease of 45 percent in four months, the CBO said.

The CBO estimated that during the rest of Bush’s term, there will be a total surplus of $2 billion outside Social Security -- compared to $8 trillion of spending in the same period.

Democrats are seeking to tar Bush’s tax cut as irresponsible and force the White House to acknowledge it must scale back its defense request or cut other politically popular programs.

“We’ve got a problem now, and for the rest of the Bush administration years,” said John Spratt (S.C.), senior Democrat on the House Budget Committee. With the tax cut, the Bush administration “cut themselves to the margin and left no room for error.”

But the White House is betting that the new fiscal reality has left Democrats with little maneuvering room, forcing them to cut deals that leave much of Bush’s requests intact.

Rather than dispute the differences between the congressional and White House estimates, administration officials Monday minimized them. White House budget director Mitchell Daniels contended the projections were essentially identical so it was not worth arguing over them.