November 1, 1999

Congressional Actions Would Not Avoid
A Non-Social Security Deficit in 2000
But Social Security Would Not Be Raided or Harmed

by James Horney and Robert Greenstein

There is a dispute over whether the 13 appropriation bills that Congress has now passed, including several vetoed by the President, would preserve a surplus in the non-Social Security part of the budget or would result in a modest deficit in that part of the budget. Both parties in Congress have brandished letters from the Congressional Budget Office that they claim show their position to be the accurate one.

Although this debate concerns relatively small differences in a $1.7 trillion federal budget, it has taken on political importance, as leaders of each party accuse the other of "raiding" the Social Security trust fund and thereby weakening Social Security for future beneficiaries.

Despite the heated rhetoric surrounding this debate, however, the basic facts should not be in dispute. First, the Congressional Budget Office has said its best estimate is that the appropriations bills which Congress has passed would result in a $17 billion non-Social Security deficit in fiscal year 2000. (See table below.) What the CBO letter supposedly showing these bills would not result in a deficit actually says is that the $17 billion deficit disappears — and is replaced by a $1 billion surplus — if one accepts the "scorekeeping adjustments" that the Republican Congressional leadership is using; those adjustments subtract nearly $18 billion in expenditures from the amount that CBO actually estimates will occur.

Before too much is made of the fact that CBO does believe these bills would produce a small non-Social Security deficit, however, a second key point should be made. Such a deficit would not result in any raid on the Social Security trust fund or have an adverse effect on the Social Security benefits that future beneficiaries will receive. Neither Social Security benefits nor the assets of the Social Security trust funds would be directly affected by a non-Social Security deficit in 2000.(1)

It also may be noted that with a $17 billion non-Social Security deficit, the total budget surplus still will be $130 billion in fiscal year 2000 under CBO projections, a notable accomplishment.


Claims About Balancing the Non-Social Security Budget

The assertion that Congress is balancing the non-Social Security budget — and not using any surplus Social Security funds to help cover the costs of non-Social Security expenditures — is based on the following claims and statements:

Claims Based on Unrealistic Assumptions and Gimmicks

These claims rest on several rather transparent gimmicks and highly dubious assumptions.(2)

The Non-Social Security Deficit Under Realistic Assumptions

Under the more realistic assumptions of the Congressional Budget Office, the actions Congress has taken to date would produce a deficit in the non-Social Security part of the budget of $17.1 billion. This does not include the effects of the tax bill the President vetoed on September 23 or the likely costs of future appropriations (either in revised versions of vetoed regular appropriation bills for FY 2000 or in supplemental appropriation bills next year) for peacekeeping operations in Kosovo and East Timor, further implementation of the Wye Memorandum on the Middle East peace process, and assistance to victims of Hurricane Floyd. It also does not include the effects of tax and entitlement legislation that may be considered in coming weeks, such as legislation to roll back some of the Medicare savings provisions affecting health care providers that were included in the 1997 Balanced Budget Act and legislation containing various tax cuts.

CBO's Estimates of the Effects of Congressional Action on the
Non-Social Security Surplus for Fiscal Year 2000

(in billions of dollars)
CBO July 1999 baseline non-Social Security surplus 14.4
Effects of actions taken by Congress
"Scorekeeping adjustments" to CBO's estimates
Reduce estimated defense outlays 9.7
Reduce estimated transportation outlays 1.3
Reduce estimated other non-defense outlays 3.0
Count spectrum auction savings that CBO does not believe will be achieved 2.6
Count more savings - primarily in the student loan program - than CBO estimates 1.1
Subtotal from scorekeeping adjustments to CBO's estimates 17.7
Emergency appropriations
Census 4.1
Defense 4.8
Agriculture 8.3
Low-income Home Energy Assistance 0.9
Other 0.4
Subtotal from emergency appropriations 18.6
Across-the-board cut in appropriations -3.5
Other savings in appropriation bills -2.1
Total increase in discretionary spending above cap 30.7
Debt service 0.8
Total effect on the surplus -31.5
Resulting non-Social Security deficit -17.1
Source: Congressional Budget Office

According to CBO's estimates, therefore, legislation already adopted by Congress would produce a deficit in the non-Social Security part of the budget. CBO officially estimates, in letters CBO director Dan Crippen sent to Representative John M. Spratt, Jr. and Senator Frank R. Lautenberg on October 28, that under those bills, the non-Social Security deficit will be $17.1 billion. Forthcoming legislation, such as additional emergency appropriations and legislation providing tax cuts or increases in entitlement spending, could increase this modest non-Social Security deficit.


Misunderstanding Social Security

A modest non-Social Security deficit in 2000 now seems inevitable under CBO's current assumptions. But despite the statements of various Members of both parties, such a deficit would not constitute a "raid" on Social Security that would weaken Social Security's financial position. The Social Security trust funds are not directly affected by the level of the surplus or deficit in the non-Social Security part of the budget, a point widely misunderstood.

In a memo attached to the October 28 letters sent to Representative Spratt and Senator Lautenberg, CBO makes the point clearly:

That [Social Security] surplus is invested in Treasury securities and earns interest for the trust funds. The cash that the Treasury receives in return for those securities can be used in two ways. If the revenues and expenses of the rest of the government (other than Social Security) are in balance, the cash generated by the Social Security surplus is used to reduce federal borrowing from the public — that is, to pay down the debt. Alternatively, if the budget of the rest of the government is in deficit, some of the cash generated by the Social Security surplus is used to pay other expenses of the government and to avoid the need to borrow from the public to support that spending. In either case, the balances credited to the Social Security trust funds and the government's legal obligation to pay Social Security benefits are unaffected [emphasis added].(3)

This is not a defense of substantial non-Social Security deficits. Using the Social Security surpluses to pay down debt is a sound idea; it is helpful both to the long-term prospects of the economy and to the nation's long-term fiscal health. Doing so increases national saving, which in turn should result in small increases in the long-term economic growth rate. And a larger economy can more readily afford to provide the resources to finance Social Security, Medicare, and other needs in the future.

Paying down debt also reduces the interest payments the federal government must make on the debt, thereby creating more room in the budget to help finance spending for other programs or tax cuts. Furthermore, paying down debt would give the government more flexibility to borrow in the future to help address the fiscal crunch expected to occur when the baby boomers retire without amassing a level of national debt that could seriously injure the economy.

Paying down debt thus is an important goal to pursue. A $20 billion or $30 billion non-Social Security deficit in fiscal year 2000 is too small, however, to have any noticeable effect on long-term economic growth.

Some of the devices being used to support the claim that the Congress is preserving a non-Social Security surplus in 2000 and thereby protecting Social Security illustrate the confusion rampant on this subject. The beneficial effects of a non-Social Security surplus come from the contribution that such a surplus makes to debt reduction. But shifting revenues from 2001 into 2000 (as is done in legislation extending expiring tax credits) and delaying obligations of discretionary appropriations in order to shift outlays from 2000 into 2001 (as is done in the Labor-HHS-Education appropriation bill) simply reduces the total budget surplus in 2001 by the amount that such maneuvers increase the surplus in 2000 — leaving federal debt at the end of 2001 unchanged. Focusing so intently on balancing the non-Social Security part of the budget in the current year detracts attention from what is important in the debt reduction area — how much the federal debt is reduced over the next 10 or more years under realistic assumptions.

End Notes:

1. See James Horney and Robert Greenstein, "A Small Non-Social Security Deficit In Fiscal Year 2000 Would Not Adversely Affect Social Security," Center on Budget and Policy Priorities., September 17, 1999,

2. Other gimmicks, such as using advance appropriations to move funding from 2000 to 2001 without cutting real spending, are not addressed here because they affect only budget authority, not outlays, and therefore do not affect the fiscal year 2000 surplus calculation.

3. Congressional Budget Office, Discretionary Spending Caps, Deficits, and the Social Security Trust Funds, October 28, 1999.