As printed in the New York Daily News, October 8, 1998
by Gene Sperling
In the Fall of 1997, when the prospects for the first budget surplus in a generation emerged, many members of Congress rushed out with expensive new ways to spend that surplus from new spending on government programs to costly tax plans. But in his State of the Union address last January, President Clinton put Americas long-run economic interests ahead of short-run politics by demanding that we reserve every penny of the budget surplus until we have strengthened Social Security for the 21st century. President Clintons commitment to save Social Security first is right for our economy and right for our future.
First, until we reach bi-partisan Social Security reform, no one knows how much of the surplus is needed to save the system. Reserving budget surpluses for that purpose gives us an additional resource to meet the costs of comprehensive reform. That is why President Clinton resisted all such proposals this year from the hundreds of billions of dollars on a transportation bill to a $700 billion tax-cut plan. If we relax that fiscal discipline before we save Social Security even for an $80 billion tax package we will find ourselves on a slippery slope and end up squandering the surplus and weakening the prospects for bi-partisan Social Security reform.
Second, the budget surplus is fundamentally a Social Security surplus. Over the next 10 years, surpluses in the Social Security Trust Fund account for 98% of our overall projected surpluses. If nearly all the surplus comes from Social Security, doesnt it make sense to save the surplus until we know how much is needed to save Social Security?
Third, preserving the surplus helps create a strong incentive for actually getting Social Security reform done. It is normally impossible for our democracy or any democracy to tackle long-term problems while the crisis is still only on the horizon. Putting the surplus off-limits until we address saving Social Security provides a strong impetus for all of us to do something to solve a fiscal challenge early so we can prevent a crisis later. If we eliminate this incentive, we may jeopardize Social Security reform itself.
Finally, deviating from our successful policy of fiscal discipline would send the wrong message to the world. In 1993, when the President attended the G-7 Summit in Japan, the major economies of the world chastised the United States for letting its budget deficit grow so big. If Clinton had not moved quickly to cut America's budget deficit and help make our economy a bulwark of stability, the world economic situation would surely be much worse today. Nations and markets around the world now look to the United States for economic leadership. Any retreat from our fiscal discipline when we have still not solved the long-term challenge of Social Security would be the wrong signal at the wrong time to the global economy.
Six years ago, Americas budget deficit was $290 billion. This past year, we had an approximately $70 billion budget surplus the first surplus since 1969. We have fixed our fiscal deficit; now we must fix our generational deficit. We will have plenty of time to discuss whether to use the surplus for other purposes after we reform Social Security. Until then, though, we should save every penny of the surplus until we save Social Security.
Sperling serves as Assistant to the President for Economic Policy and as director of the Presidents National Economic Council.