Commentary: The Lockbox Has George In A Boxby
Remember that Social Security lockbox that Al Gore kept talking about in the campaign? Well, Gore is gone, but the lockbox isn't. And it may be about to imprison George W. Bush's hopes for a big, antirecessionary tax cut.
Backed by a huge congressional majority in 1999 and embraced by both Bush and Gore in the Presidential campaign, the device was created to keep the budget's Social Security accounts off-limits to both tax cuts and new spending. Now, it is going to force the new President to make a tough political choice: Does he scale back his ambitious fiscal agenda, including his plan to use tax cuts to give the economy a quick boost? Or does he take the politically and economically risky step of dipping into the Social Security funds he promised to protect? Says top economic adviser Lawrence B. Lindsey: "It's a question that needs to be asked."
The correct answer is: "Don't mess with the lockbox." Tapping into Social Security to fund a short-term stimulus package in the face of a modest slowdown "would be a very bad idea," says Robert Bixby, executive director of the Concord Coalition, a bipartisan budget-reform group. Such a move would rest on the dubious theory that boosting short-term consumption is better for the long-term economy than savings and investment. And it would make it harder for Bush to pursue his plan to create Social Security private accounts.
FLIP-FLOP. But there is an even more important reason not to touch the Social Security surplus. A flip-flop on the lockbox could weaken fiscal discipline and diminish Wall Street's and the public's confidence in the new President. In his Aug. 3 acceptance speech to the Republican National Convention, the Texan pledged: "George W. Bush will keep the promise of Social Security: No changes, no reductions, no way." Dipping into Social Security funds, says new Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) "[would look] like you're playing games, and when you're playing games, you lose credibility."
Why would Bush aides even consider tapping the lockbox? Here's the problem: He wants a big tax cut this year to spur consumer spending. He's also likely to ask for a quick shot of new funding for defense, education, and prescription drugs for seniors. On top of all that, he will probably have to grant business some tax breaks and give a divided Congress cash for its own priorities. What will all that cost? Many economists figure that it would take a $100 billion tax cut this year alone to stoke the economy. And figure on at least $25 billion in new spending.
Trouble is, Bush will have surprisingly little non-Social Security money to play with--at least in the short run. On Jan. 16, the Clinton Administration estimated that while the cumulative federal surplus over the next decade could hit a staggering $5 trillion, money will be relatively tight over the next few years--the period when any stimulative tax cut would kick in.
In the current fiscal year, the total surplus will likely be $256 billion. But $160 billion of that is reserved for Social Security. An additional $27 billion is supposed to help prop up the troubled Medicare program. That leaves barely $70 billion for tax cuts and other new spending. In 2002, the story will be the same--only about $70 billion will be available for new spending or tax cuts.
Grassley, who will play a key role in enacting a tax cut this year, is not the only pol who is skeptical. Conservative Democrats, whose votes Bush needs to pass any quick-fix tax relief, also are dead set against jimmying the lockbox. Representative F. Allen Boyd Jr. (D-Fla.) says Bush should "absolutely not" mess with the Social Security fund.
With $2.5 trillion in non-Social Security surpluses projected over the next decade, voters deserve a tax cut. But delivering it by blowing what little budget discipline Washington has will hurt more than it helps. Read Grassley's lips, Mr. President: The price in lost credibility for busting the lockbox would greatly outweigh whatever modest stimulus you'd get from a tax cut.