White House Budget Director Estimates 2001 Budget Surplus at $120 Billion; Social Security “Substantially Eroded”

The weakening economy will likely "depress" the fiscal 2001 federal budget surplus to $120 billion -- a decline from the $158 billion projected by the Bush administration last month, White House Budget Director Mitch Daniels said yesterday. The AP/Worcester Telegram & Gazette reports that it is "unclear" how much of this drop can be attributed to the Sept. 11 terrorist attacks; Daniels said the reduced estimate was due primarily to decreasing federal revenues. "Separately," an aide to the Congressional Budget Office said the CBO "is now expecting" the surplus for fiscal 2002 -- which begins Oct. 1 -- to "plummet" to between $36 billion and $56 billion, down from $176 billion projected last month. Much of this decrease was attributed to increased spending on defense, intelligence, airline assistance and "perhaps other ailing industries" in the wake of the attack (Fram, AP/Worcester Telegram & Gazette, 9/27). Since Sept. 11, Congress has approved $55 billion in new spending and is considering at least an additional $140 billion in "various forms of post-attack aid," including an economic stimulus package (Riskind, Columbus Dispatch, 9/27). If the projections by Daniels and the CBO are correct, the projected surplus in the Social Security trust fund for each year "would be substantially eroded." The attacks and subsequent weakening of the economy have made promises by both parties not to tap the Social Security surplus "moot," the AP/Telegram & Gazette reports. Rep. John Spratt (D-S.C.), ranking member of the House Budget Committee, issued a report saying that the federal government could run a deficit next year for the first time since 1997, a prospect that is "being met with grim acceptance by members of both parties." Sen. Charles Grassley (R-Iowa) said, "I don't think [budget constraints are] a prime consideration when you're fighting a war and when you may be in a recession" (AP/Worcester Telegram & Gazette, 9/27).