September 18, 2000
Earlier this year, the President proposed policies to eliminate the public debt by 2012. Those proposals would have used the entire off-budget surplus and portions of the on-budget surplus to reduce the debt throughout the next decade. Unfortunately, Congress instead pursued a series of costly tax proposals that, taken together, would drain away the Nation's hard-earned budget surplus -- risking a return to deficit spending and leaving no on-budget resources to extend the life of Social Security or Medicare, invest in education, or pay down the national debt. The Administration is pleased that Congress is currently reversing course and rejecting those explosive tax cuts by focusing on debt reduction, at least for one year, but regrets that the Congress has not worked with the Administration to craft a long-term framework to safeguard the Nation's financial future.
The Administration is pleased that the legislation moves in the direction of the Vice President's recent proposal to take Medicare off-budget by creating parallel lockboxes for both Social Security and Medicare. However, H.R. 5173 could be stronger if it followed this proposal and took the further step of truly placing Medicare off-budget, the same treatment currently provided by law to Social Security.
The Administration also has some technical concerns about the workability and effectiveness of the legislation's enforcement provisions. In particular, the Administration believes the legislation would be stronger if it excluded its "trap door" loophole that could allow the trust fund surpluses to be used to finance proposals that could threaten fiscal discipline and the Nation's ability to pay future Social Security and Medicare benefits. The Administration also believes the legislation should be strengthened to reduce potential complications in managing macroeconomic policy during an economic downturn.
Finally, the debt reduction mechanism in H.R. 5173 would not actually reduce debt held by the public. Presently, every dollar that is not spent is used to reduce the public debt even if that dollar is not channeled through the new debt reduction account created in this bill. Since the legislation would have no impact on Federal spending or revenues, public debt levels would not be reduced under the bill. Furthermore, the Administration is concerned that the bill's attempt to use the debt limit to force a specific action, even one as salutary as debt reduction, is inappropriate and sets a disturbing precedent.
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