Bush budget plan balances with delay in Social Security accounts, revenue improvements

Wednesday, January 17th 2007, 9:05 pm

By: News On 6

WASHINGTON (AP) _ President Bush would try to keep his promise to balance the budget within five years in part by again delaying his plan to add private accounts to Social Security.

The step is a bow to political reality that also makes it easier to erase the deficit without draconian cuts to federal benefit programs. Bush's Social Security plan bogged down under a Republican-controlled Congress less than two years ago.

Now that Democrats are in charge, private accounts are a nonstarter, though Bush will leave at least a placeholder in his budget plan rather than abandon them entirely.

Combined with above-average growth in tax revenues _ and continued pressure on domestic agency budgets _ the decision to purge costs associated with his plan for private accounts makes it much easier to achieve balance without politically dangerous cuts to Medicare or other programs popular with the public.

Even though Bush's plan for Social Security private accounts collapsed in 2005, he proposed $82 billion over 2010-2011 for such deficit-financed accounts in last February's budget proposal. That represented a one-year delay from 2005.

Now, the White House is planning another one- or two-year delay in which the costs of private accounts won't show on Bush's budget ledger until 2011 or 2012 _ which is the year by which the president promises balance.

"It gets easier" to erase the deficit by putting off Bush's dormant Social Security plan, said White House budget director Rob Portman. "The question is whether to delay it for one or two years."

Direct comparisons aren't available, but a two-year delay would wipe more than $30 billion from the 2012 deficit based on earlier White House estimates of the costs of the private accounts. A one-year delay would save far less but would demonstrate a continuing commitment to the idea despite the political obstacles.

Continued improvements in revenues from earlier White House and congressional estimates promise to close much if not all of the remaining deficit gap for 2012.

The White House has yet to produce an estimate for the target year, but the CBO predicted last March the Bush budget plan, if enacted, would have produced a $158 billion deficit gap. Revenue improvements have already narrowed that gap considerably and the picture continues to improve.

"There's no real magic here," Portman said about meeting Bush's pledge to balance the budget. "It is fiscal restraint on the one hand _ spending discipline. And on the other hand it is a steady economy."

Bush credits two major rounds of tax cuts for the cruising economy, and his upcoming budget plan will again propose making them permanent law instead of expiring in 2010.

Democrats have long said Bush and his budget team fudge budget numbers by making unrealistic assumptions about spending curbs and for failing to account for the long-term costs of the Iraq war and expensive changes to the alternative minimum tax. They are sure to register similar complaints when the White House reveals its new budget Feb. 5.

Still, both Portman and Democrats such as Senate Budget Committee Chairman Kent Conrad, D-N.D., say that regardless of the near-term deficit picture, major changes are needed for benefit programs such as Social Security, Medicare and the Medicaid health care program for the poor and disabled in order to absorb an influx of baby boomers.

Portman also said that he does not expect "major differences" with congressional Democrats as they piece together a catchall spending bill to wrap up about $463 billion in leftover appropriations work from last year.