U.S. will borrow to pay those tax rebates; Social Security may be tapped Tuesday, July 31, 2001

By JONATHAN FUERBRINGER THE NEW YORK TIMES

The Treasury said yesterday that it will borrow the money needed for the tax rebates that are now going to U.S. taxpayers as part of President Bush's $1.35 billion tax cut.

And dipping into Social Security money may be next.

The government's plan to sell Treasury securities in order to pay the rebates -- up to $600 per couple or $300 for individuals -- reflects a cash-flow squeeze, not some sudden turn of the budget from surplus to deficit. Still, it is another sign of how markedly the outlook for the government's budget surplus has changed in the last two months, as the economy and tax revenues have slowed dramatically.

Further, with the Bush administration now estimating that the surplus for this fiscal year, which ends Sept. 30, could fall as low as $160 billion, the administration and Congress are coming dangerously close to doing something they have promised not to do -- using some of the Social Security surplus to pay for tax cuts or government spending. As recently as January, that surplus was forecast to be $281 billion.

"If things continue to deteriorate, you will be there this year," said Robert Barbera, chief economist at Hoenig & Co., of the possibility of using some of the Social Security surplus. That could set off a partisan political catfight as Congress and the White House struggle to avoid tampering with the so-called Social Security lockbox.

The announcement came as the Treasury said that slowing tax receipts, a change in the due date for corporate tax payments and the $38 billion price tag for the tax rebates had radically changed its plans for borrowing in the July through September quarter, which is the last in fiscal year 2001.

Instead of paying down $57 billion in debt, as the Treasury expected on April 30, the Treasury now plans to borrow $51 billion. "The change in borrowing reflects a number of factors, most significantly the shift in the September 15 corporate tax due date to October 1 and the need to finance in this quarter the tax rebates," the Treasury said in a statement.

In April, the 10-year tax-cut program, including the rebates, had not been worked out. Nor had Congress yet voted to delay corporate tax payments to Oct. 1, the first day of the next fiscal year. That moved about $30 billion from this year to next and could cost the government $40 million in lost interest.

And while economists were expecting tax collections to slow down, it was not clear until the June corporate tax receipts were reported -- and the June budget surplus came in $24 billion below the previous year's level -- how sharp the decline had been. Treasury officials said that receipts in the third quarter also would be about $20 billion less than they had expected.

Tony Fratto, a Treasury spokesman, said, "We made a decision to implement an immediate economic stimulus through tax cuts. These number simply reflect those changes."

http://seattlep-i.nwsource.com/money/33307_rebate31.shtml

-- Martin Thompson (mthom1927@aol.com), August 01, 2001

Answers

Not only do we have to pay those "advances" back next April, now we have to pay again out of Social Security! Typical. What do you want to bet the "loan" from the SS surplus never gets paid back? Grrrr.

-- Margaret J (mjans01@yahoo.com), August 02, 2001.

wait one darn minute here! what ever happened to that surplus that was suppose to shore up social security and pay down the national debt?? And what's this I hear???? There is NO SANTA CLAUS?

-- Rob McCarthy (celtic64@mindspring.com), August 02, 2001.

It's an old story: the surplus is based on how it looked AT THAT MOMENT... and of course, it changed... so...."PAY NO ATTENTION TO THAT MAN BEHIND THE CURTAIN" --Allan

-- Allan Browne (albrowne@att.net), August 07, 2001.