WHAT SURPLUS?: EMERSON SAYS, "DO THE MATH," DEFICIT HAS BEEN MASKED

"Do the math." There isn't a federal budget surplus, says U.S. Rep. Jo Ann Emerson.

President Clinton and many in Congress talk about a $70 billion budget surplus, but Emerson says the "surplus" is largely accounting fiction, generated by a federal government that is siphoning off Social Security money to cover its expenses.

The Cape Girardeau Republican wants Congress to approve a constitutional amendment that would require the nation to have a balanced budget that doesn't include any Social Security surplus. Such an amendment would have to be ratified by three-fourths of the states.

U.S. Rep. Ernest Istook Jr., R-Okla., has pushed such a measure, but Emerson concedes the legislation faces an uphill battle.

In fiscal 1998, the government -- excluding Social Security -- ran up a $29 billion deficit, the Congressional Budget Office said.

Social Security, the nation's tax-funded retirement program, generated a $99 billion surplus.

Added together, the figures showed a $70 billion surplus.

But Emerson argued that the government shouldn't be tapping into Social Security to balance the budget.

Social Security used to be completely separate from the rest of the federal budget.

But in 1968 during the administration of President Lyndon Johnson, the Social Security fund was brought into the overall budget.

Emerson said the accounting change was made because Johnson wanted to mask the deficit and the cost of the Vietnam War.

"We will not see a budget surplus that doesn't include money collected from FICA taxes for Social Security until 2001," she said.

Excluding Social Security money, the federal government will run a $19 billion deficit this fiscal year and a $7 billion deficit in fiscal 2000, the Congressional Budget Office estimates.

But government accounting will show a surplus of $107 billion this year and $131 billion in fiscal 2000 by adding in the excess revenue in the Social Security fund.

"We ought to be perfectly honest that we have a budget deficit," Emerson said from her Washington office last week.

The Congressional Budget Office projects the nation will have a true surplus, which excludes Social Security money -- of $6 billion in fiscal 2001.

For all practical purposes, there isn't a Social Security Trust Fund, Emerson said.

Dr. Bruce Domazlicky, a Southeast Missouri State University economist, agreed.

"The trust fund, to me, has always been a little bit of an accounting fiction," said Domazlicky, who directs the Center for Economic and Business Research.

Domazlicky said the Social Security Administration lends its surplus revenue to the U.S. government. The government, in turn, gives the Social Security Administration IOUs in the form of Treasury bonds.

But that could change in 2021 when it is projected that Social Security expenses will exceed revenue.

At that point, the government will have to borrow money from other sources, raise taxes or cut spending so it can pay back the Social Security fund.

As a result, Domazlicky said it makes sense for the government to start putting money back in the Social Security fund once it starts realizing real surpluses.

Even if there is a true surplus outside of Social Security, Emerson said the federal government remains mired deeply in debt.

The nation's debt stands at $5.6 trillion.

Interest on the debt totaled $243 billion in fiscal 1998. This year, the government expects to spend $231 billion in interest payments on the debt, Emerson said.

"That is second only to the cost of our national defense," she said. "It is just mind-boggling."