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American Morning

CBO Forecasting Treasury Will Have to Dip into Social Security to Pay Bills

Aired August 28, 2001 - 11:09   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LEON HARRIS, CNN ANCHOR: You can shake the piggy bank all you want, it is empty. Today, Congress is releasing its revised budget estimates for 2001. The non-partisan Congressional Budget Office is forecasting the Treasury will have to dip into Social Security to pay its bills. The new budget reality is setting up a really good budget tussle when the president and Congress get back from vacation.

CNN's Brooks Jackson joins us now from Washington to help us crunch the numbers -- Brooks.

BROOKS JACKSON, CNN CORRESPONDENT: Well, Leon, the CBO report is out today. Of course, we were told pretty much what was in it yesterday. But we do see some more details, and the headline is that the budget surplus, the total budget surplus for the federal government is $122 billion less projected for this fiscal year than was projected in January.

Here's how it breaks out. The CBO says that $74 billion of that reduction comes because of the tax cut. We're getting those advanced payment checks in the mail, and payroll withholding was reduced in July. Twenty five billion of the reduction because of a sluggish economy. Growth has turned out to be less than was projected back in January. Seven billion dollars, Congress added in new spending, 5.5 billion of that is for emergency farm relief. Sixteen billion dollars is technical. These are accounting changes, and that more than accounts for the $10 billion difference between OMB, that's the administration's projection, and CBO's protection.

This would be good news if it weren't for the politics. There's $153 billion surplus left. That is 1 1/2 percent of the entire output of the economy, and that's the second best since 1951. As you know in Washington and more of today and in the future, it's all about politics. And this is going to be a big political fight between the administration and the Democrats in Congress over whether Social Security has been touched and whether promises have been broken.

HARRIS: All right, Mr. fact-checker, politics aside, then, put that aside and take that off the table. What do these dueling reports actually say about the future of the economy right now?

JACKSON: That's the interesting to me. If you are worried more about paycheck than about government accounting, there are contrasting projections between how the economy is going to fare in the next year. Now, the Congressional Budget Office has turned pretty pessimistic. They're saying that we will get out of this sluggish growth and we will have 2.6 percent economic growth next year. The administration is more optimistic. They say that we're going to have 3.2 percent growth.

Now, remember, last quarter, between April and June, the economy hardly grew at all, so that would be quite a recovery.

Now how does this stack up with private economists? The blue chip forecast, which is a newsletter that surveys dozens of private economists, say the average of those projections is about 2.8 percent growth next year, so the Congressional Budget Office is a little more pessimistic than the private sector. The White House is a little bit more optimistic. They're both in a zone of reasonableness, and everybody's projecting better times next year.

HARRIS: All right, let the fight begin. Brooks Jackson in Washington, thanks much.

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