OMB Director Defends Using Medicare Part A Surplus Funds

Responding to Democrats' criticism about President Bush's budget proposals, White House Office of Management and Budget Director Mitch Daniels said July 12 the projected $28 billion surplus in the Medicare Part A trust fund this year is "artificial" and does not need "protect[ion]" in the federal budget, the Philadelphia Inquirer reports. Speaking before the Senate Budget Committee, Daniels said that the Social Security surplus should be protected, but "argued that Medicare" does not truly have a surplus because only Part A (which covers hospital care) is funded by payroll taxes, while Part B (which covers other services) relies on general tax revenue (Moritsugu, Philadelphia Inquirer, 7/13). In a news analysis on the budget surplus, the New York Times explains, "Spending some of the Medicare surplus would not have any direct effect on the government's ability to cover Medicare benefits, and the administration dismisses the concept of a Medicare surplus as an accounting gimmick" (Stevenson, New York Times, 7/13).

Democratic Response
On Wednesday, Daniels said that the overall budget surplus, including both trust funds, would be at least $160 billion at the end of this fiscal year, down from a $237 billion surplus last year and a Congressional Budget Office estimate of $200 billion following the passage of President Bush's tax cut (Fram, AP/Dallas Morning News, 7/13). This drop has led to criticism from Democrats, especially Sen. Kent Conrad (D-N.D.), the chair of the Budget Committee, who has said that the administration will have to dip into the Medicare Part A trust fund to maintain a general budget surplus in fiscal year 2001, which ends Sept. 30, and to rely on both the Social Security and Medicare trust funds to balance the budget in fiscal 2002 (Godfrey, Washington Times, 7/13). Yesterday Conrad repeated those concerns, asking, "Do we use trust fund money from Social Security and Medicare to fund other programs of the federal government?" (AP/Dallas Morning News, 7/13). But Sen. Pete Domenici (R-N.M.) said Conrad's motives for calling Daniels before the committee were "political," with a Domenici aide saying that the chair is attempting to "set the stage" for the 2002 congressional elections through "Medi-scare" (Washington Times, 7/13). And Sen. Charles Grassley (R-Iowa) said that Democrats were engaging in "blatant demagoguery," adding that the "real challenge to the surplus" is holding down congressional spending (AP/Dallas Morning News, 7/13).