WHITE HOUSE, Democrats battle again over falling budget surplus projections

WASHINGTON (AP) _ Congressional Democrats and the White House are renewing their clash over the slumbering economy and the budget's worsening prospects, even as Republicans hunt for ways to prevent

Thursday, September 6th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ Congressional Democrats and the White House are renewing their clash over the slumbering economy and the budget's worsening prospects, even as Republicans hunt for ways to prevent Social Security surpluses from being spent.

White House budget director Mitchell Daniels was expected to tell the Senate Budget Committee on Thursday that Social Security surpluses would not be siphoned off to pay for other government operations and that the program's beneficiaries have nothing to worry about. Those are the same claims President Bush and other administration officials have made repeatedly since surplus projections were downgraded dramatically last month.

``The fiscal condition of the federal government is in excellent shape,'' Daniels told the House Budget Committee on Wednesday. ``It's the economy right now that is not.''

But in a likely preview of Thursday's hearing, Senate Budget Committee Chairman Kent Conrad, D-N.D., on Wednesday cited projections by the nonpartisan Congressional Budget Office. CBO said $9 billion of the Social Security surplus would be spent this year and the budget would come within $2 billion of doing it again next year too _ something Bush and members of both parties have promised to avoid.

``He over-promised,'' Conrad said of Bush. ``And one of the promises that he made that he is now not keeping is the pledge not to take Social Security trust funds to finance the other operations of government.''

Overall federal surpluses are still expected to hit near-record levels for the next few years, despite the economic slowdown. Using small amounts of Social Security funds to finance other programs has no effect on the program's solvency or ability to pay benefits, but Bush and lawmakers from both parties have pledged not to use that money as a symbol of their fiscal responsibility.

Meanwhile, in a closed-door meeting Wednesday, House GOP leaders decided to ask the White House to take administrative actions in the waning days of this fiscal year to ensure that Social Security surpluses are not spent, Speaker Dennis Hastert, R-Ill., said in a brief interview. Fiscal 2001 ends Sept. 30, and lawmakers have little stomach for enacting 11th-hour spending cuts for this year.

As for making sure Social Security surpluses are not tapped next year, one option House GOP leaders discussed is an across-the-board cut in spending, said another participant in the meeting who spoke on condition of anonymity. Congress currently is working on next year's spending bills.

Hastert also said Republicans want to work this fall on a capital gains tax reduction and other measures that could ``keep growing the economy.'' Just Tuesday, Bush said he preferred to wait until next year to see if the $1.35 trillion, 10-year tax cut enacted this year was bolstering the flagging economy.

Senate Majority Leader Trent Lott, R-Miss., also said he wanted to pursue a capital gains tax cut this fall. He said it could be attached to a minimum wage boost that Democrats want, or to other legislation.

In addition, House Majority Leader Dick Armey, R-Texas, said he favored a fresh effort to revive the economy that would include a capital gains tax cut, strengthened authority for Bush to negotiate overseas trade pacts, and other items.

The divergent timetables for action between Bush and congressional Republicans is fueled by the differing political needs of the two.

GOP lawmakers face November 2002 elections for control of Congress in which they want to be seen as having tried mightily to revive the economy. Bush, nurturing his image as a compassionate conservative for his 2004 re-election bid, has so far distanced himself from a capital gains tax reduction, criticized by Democrats as an expensive boon to the rich.

A confrontation between congressional Republicans and Bush is not in the offing. GOP lawmakers think they could win points by pushing an economic package this fall if either the Democratic-controlled Senate kills it or it is shaped to win bipartisan support and becomes easy for Bush to sign.