"Administration Forecasts Larger Reduction of the National Debt",
By Richard W. Stevenson
Washington, May 1 -
"The Clinton administration said today that the federal government expected to pay off substantially more of the national debt this year than previously projected.
In a statement, President Clinton said the federal government intended to pay off $ 216 billion in debt during the fiscal year that ends Sept. 30, or 6.2 percent of the $ 3.5 trillion in national debt held by the public.
In February, the administration projected that it would pay off $ 167 billion this year.
Treasury Secretary Lawrence H. Summers said in a news conference at the White House today that the larger reduction was the result of the strong economy generating higher than expected tax revenues.
Mr. Summers said there had been a surge in payments for 1999 tax liabilities made around the April 15 filing deadline and in corporate and individual tax payments so far in 2000.
By the end of the fiscal year, he said, the government will have paid off $ 350 billion in debt since fiscal year 1998, reflecting the shift from decades of federal budget deficits to large and growing surpluses.
Mr. Summers said debt reduction in April, May and June, the three months in which the government typically takes in the most money, should total $ 185 billion, up from $ 114 billion in the same period last year.
The Treasury Department is reducing the debt by rebuying bonds and other securities it has issued and by not renewing others on maturity.
Mr. Summers said the administration had not yet calculated a new surplus estimate for the fiscal year. In February, the administration estimated that the total surplus this year would be $ 179 billion, including $148 billion from excess Social Security payroll tax revenues.
Today's figures suggested that the surplus would be tens of billions of dollars higher than projected - an improvement that would probably ripple into the surplus projection for next year, giving Congress a bigger pool of money as it turns this week to writing the spending bills that would finance the government's operations in 2001."
"Since 1998, the Post-Deficit Federal Budget has reflected increased revenue flows into the General account, and into the Social Security Trust Fund and the Medicare Hospital Trust Fund, with increasing expenditures in the general budget, but with decreasing expenditures in the Social Security and in the Medicare accounts, following imposed ceilings in the expenditures of these latter accounts.
Ordinarily, this would result in increased balances in both the Social Security Trust Fund and the Medicare Hospital Trust Fund (see: Wall Street Journal, Tuesday, July 28, 1998, page A2), with increased earned interest for both Trust Funds, but now, the Clinton administration is instead using the Social Security Trust Fund "excess Social Security payroll tax revenues" to pay down the National Debt aquired by previous General account expenditures in the 1980s.
Such diversion of Social Security Trust Fund assets reduces The Social Security Trust Fund principal and the interest earned on such principal, reducing the Trust Fund assets available for future beneficiaries. At the same time, such diversion, and the new federal rebuying of bonds and other securities held by private individuals, reduces the need (and risk) for such private funds in the future, while increasing the need (and risk) for repurchase of bonds and securities for Social Security and Medicare funds in the future.
In net effect, without the approval of Congress, a transfer of public Trust Funds to private hands is now being performed, with the additional cost of a transfer of private risk to Trust Fund risk in the future."
Reference: "Making Sense of the Post-Deficit Budgets: Despite Surpluses, Measuring the Fund Can Still Pose Problems", Wall Street Journal, Tuesday, July 23, 1998, page A2.
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