The political stakes for the 2000 election are the highest they have been in a generation. Whichever party wins the presidency could, in all likelihood, win the House and Senate and, thus, shape public policy for at least the next couple of decades. Barring a change in the current political climate, Pres. Clinton and the 106th Congress probably will be unable to reach a compromise on most major questions: Will income taxes be reduced, modified, or flattened? Will Social Security and Medicare be financially secured? Will any education funding be channeled into school vouchers? How will the surplus, should it actually materialize, be handled--by paying down the national debt, reducing taxes, increasing spending, or, more realistically, by what combination of the three?
Having avoided conviction by the Senate after the House voted for impeachment, Clinton has shown dazzling footwork on domestic policy and has the Republican Party off balance. Much of his program is designed to make voters think he has solved problems without much visible pain or cost. Like his private behavior, Clinton's programs largely are tailored for the satisfaction of the moment with little regard for the future.
The Clinton illusions begin with the alleged surpluses for this fiscal year and the next. In reality, they do not exist. They all come from the Social Security fund. This is important because the Treasury cannot use the Social Security surplus to pay down the national debt. Those funds, invested in U.S. bonds and held in trust, must be redeemed eventually to meet future Social Security obligations.
If the current Social Security surplus is subtracted from Clinton's budget, the Federal government actually will be running a $42,000,000,000 deficit in Fiscal Year 1999 and a $12,000,000,000 deficit in FY 2000. The Office of Management and Budget (OMB) does not project a significant government surplus (minus the Social Security funds) until FY 2002, and these OMB projections, as the nation has learned from painful experience, can be widely off the mark. The Congressional Budget Office, which generally makes more cautious predictions, has warned that OMB's projected non-Social Security surplus of $188,000,000,000 for FY 2009 could be as much as $300,000,000,000 in error.
Clinton's proposal to "save Social Security" is eye-crossingly complicated and represents the President at his slickest. It involves the use of the projected non-Social Security surplus in a way that...