All the talk about a budget surplus as early as the end of
this year has the Clinton Administration scrambling for new ways
to spend government revenues. For example, the President proposed
expanding the Medicare system by offering early retirees between
the ages of 62 and 64 and displaced workers 55 and older who can't
afford health insurance access to the government's health care
program for the elderly. The proposal would cost an estimated
$20 billion per year. The problem is, the $20 billion would come
straight out of the Social Security Trust Fund. Despite statements
to the contrary, there will be no budget surplus in 1998 nor,
for that matter, will there be surpluses any time in the foreseeable
future. The only reason the federal budget appears to approach
balance is that the federal government uses Social Security surpluses
to offset budget shortfalls. According to the Concord Coalition,
the federal government has borrowed $647 billion from the Social
Security Trust Fund since 1983 to create the illusion that the
budget deficit is lower than it really is. This borrowing could
have serious implications for Social Security system. By 2012,
when baby-boomers begin to take their toll on the system, the
Social Security will start running a deficit. In a somewhat ironic
twist, many of the near-elderly who will benefit from the President's
proposed Medicare expansion now will become eligible for Social
Security in 2012 -- the year the system begins to unravel. It's
a clear-cut case of robbing Peter later to pay Peter now.
The bureaucratic requirements of the global warming treaty
signed last month in Kyoto, Japan could further jeopardize chances
for a balanced budget. If ratified by the U.S. Senate, the treaty
would require the United States to reduce its greenhouse gas (GHG)
emissions by seven percent below 1990 levels by 2010, or 30% or
more below projected emissions in 2010. But the treaty also calls
for the development of an international emissions trading scheme
to allow nations like the United States to exceed their emissions
targets through purchases of unused emissions permits from overseas.
While the costs of developing such a trading scheme are difficult
to estimate given that many details have yet to be worked out
by international negotiators, a preliminary schematic of the trading
bureaucracy circulating on Capitol Hill (see figure at right)
suggests the costs would be enormous. A plethora of new agencies,
reminiscent of President Clinton's ill-fated national health care
proposal, would be required to establish a permit trading system,
much of it funded by the U.S. taxpayer. And this is only the tip
of the iceberg. The U.S. has agreed to: 1) Establish a national
system for estimating GHG emissions as well as so-called counter-balancing
"sinks," 2) Provide an as yet unspecified amount of
funding for technology transfers to the developing world and 3)
Establish special training and educational programs designed to
reduce GHG emissions.
Nothing written here should be construed
as an attempt to help or hinder legislation before the U.S. Congress.
Reprints of material in Budget Watch is permitted provided that
original source is credited. ###
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