Bush Using Social Security Lockbox as Cookie Jar

The news on the federal budget deficit for fiscal 2003 was encouraging, wasn't it? In July 2003, the Office of Management and Budget projected a record deficit of $455 billion. But when the fiscal year ended in October, the shortfall was only $374 billion, equivalent to 3.5 percent of gross domestic product.

If we factor out the so-called Social Security surplus - payroll taxes collected by the government but not paid out in benefits - the deficit in fiscal 2003 was actually far larger: $531 billion, or 4.9 percent of gross domestic product. For the current fiscal year, the administration expects that this figure, also called the on-budget deficit, will be even higher: $639 billion, or a whopping 5.4 percent of gross domestic product.

Every year since 1983, workers have paid more in Social Security payroll taxes than Social Security has paid out to beneficiaries. The surplus was supposed to be used to pay down the national debt. "That way, when the baby boomers are retired, our other debt will be lower and we'll be in a better position to borrow funds to pay for benefits," said Richard Kogan, senior fellow at the Center on Budget and Policy Priorities, a liberal-leaning group in Washington.

The figures show that the personal and corporate income taxes that are supposed to fund government operations no longer come within shouting distance of doing so. And the refusal of the administration or its Congressional allies to acknowledge this reality has left normally mild-mannered deficit hawks on the verge of apoplexy.

"The last time the situation reached this point, in the early 1990's, we had bipartisan agreement that we were reaching a fiscal crisis," said Maya MacGuineas, executive director of the Committee for a Responsible Federal Budget in Washington.

The response then was an unpalatable, but ultimately successful, mix of spending restraints and tax increases. But in the past few years - with the sums involved far greater than they were in the early 1990's, and with the baby boomers nearing retirement - Washington has raised spending sharply and cut taxes even more sharply.