DEMOCRATS, White House spar over Bush accounting change and the budget surplus

Friday, August 17th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ To the White House, changing Social Security accounting rules produces a more honest budget surplus figure. To Democrats, it is a last-minute attempt to hide the threat President Bush's tax cut poses to vital government programs.

Bush administration officials explained Thursday how the change would produce an unforeseen $4.3 billion for fiscal 2001, which ends Sept. 30. That may be just enough to allow Congress to keep a pledge not to tap Social Security for other uses as overall budget surplus projections fall.

When the White House releases its revised budget projections next week, spokesman Ari Fleischer said, they will fully protect Social Security while leaving a small surplus for this year's government operations.

``Just like a good business, the government's numbers and the government's books should be accurate,'' Fleischer said in Crawford, Texas, where Bush is vacationing.

The White House budget revision also will project economic growth for fiscal 2002 at 3.2 percent, up from 1.7 percent in fiscal 2001, officials said. A leading group of private economists this summer estimated 2002 growth at 2.8 percent, but the Federal Reserve has forecast next year's growth rate at between 3 percent and 3.5 percent.

Democrats acknowledged that the accounting maneuver may avert an immediate invasion of the Social Security trust fund. But they said it demonstrates how the president's 10-year, $1.35 trillion tax cut is quickly consuming projected budget surpluses that could be used for education, defense and other priorities.

``It's a sign of problems to come and a deteriorating budget,'' said Rep. John Spratt, D-S.C., senior Democrat on the House Budget Committee. ``Their motive is political. It's to pretty up the bottom line.''

The fight over the Social Security surplus is mainly a political one. The only practical impact of using some of the Social Security surplus for other purposes is that a lower amount of publicly held debt would be paid down. Benefits would not be affected.

Rep. Jim Nussle, chairman of the House Budget Committee, predicted that the tax cut would help the economy recover and that lower surplus projections will keep a lid on spending by Democrats, not threaten Social Security and Medicare.

``The biggest threats to our fiscal health, and to the economy, are oppressive tax burdens and out-of-control Washington spending,'' said Nussle, R-Iowa.

Gene Sperling, former President Clinton's top economic adviser, cited a move made by the tax cut as the major cause for the Bush accounting change. In the tax law, the deadline for some $33 billion in corporate tax payments was moved from Sept. 15 to Oct. 1 so the money would count toward fiscal 2002 _ leaving a big hole in the 2001 budget.

``They created this problem already by an earlier gimmick,'' Sperling said.

The accounting maneuver involves payroll taxes that go into Social Security. In the past, those collections were estimated in one year and then reconciled in a future year with the actual money collected.

The change would attribute the actual amounts for 1998, 1999 and 2000 to those years instead of to 2001, a $5.6 billion difference. Counting a second $1.3 billion change that involves the Postal Service, the non-Social Security part of the budget would net an additional $4.3 billion for 2001.

``We're going to make sure the numbers are accurate for the years they came in,'' Fleischer said.