Tom Woodruff wrote an article, Federal Surplus ‘wish lists’ don’t add up. With budgets leftovers pegged at $4.4 trillions, republicans propose across the board tax cuts, while the president eyes Social Security. A compromise seems possible.

Call it the new math, D.C. style. Washington politicians are struggling with a crisis that no one has experienced before. How to spend a surplus in the federal budget that is now estimated to be about $4.4 trillion over the next 15 years. That works out to be about $2500 per taxpaying unit (families and individuals) each year. With that kind of money at stake, the White House and the Republicans in Congress have set some ambitious goals. Woodruff reports that these aren’t real numbers, which will be explained shortly, and the mathematical acrobatics underscore how figures are tossed around nonchalantly, is so hard for most people to comprehend the true costs of new programs or tax cuts.

Republicans have proposed that the bulk of any budget surplus should go to reduce taxes. In addition Senate Finance Committee Chairman William Roth, has proposed an expansion of the 401k and others retirements saving programs that would result in reduced taxes for savers.

Clinton announced a plan to set aside $2.78 trillion (about 62%) of the projected surpluses for a cash transfusion into the Social Security Trust Funds over the next 15 years. This would be a major break with the historical concept behind Social Security. Since its inception, employer and employee payroll taxes, not general tax revenue, have funded Social Security. Since 1983, these taxes currently at 12.4% of covered payroll are designed to pay current benefits to retirees and the some. The tax actually exceeds what’s needed in the near term to cover Social Security benefits, even without the Clinton’s transfusion. That changes, of course, once baby boomer retirements start occurring.

When they talk about the federal budget surplus in Washington, the annual buildup in Social Security Trust Funds is included. Over the next 15 years, according to the intermediate assumptions used by social Security trustees, these trust funds are supposed to increase by $1.1 trillion. That money is already promised to pay for Social Security benefits. So the real surplus is just $3.3 trillion over the next 15 years, or about $1900 per taxpayer (families and individuals) each year.

Clinton actually is proposing to reallocate $2.78 trillion of additional tax dollars over the next 15 years, or about $185 billion a year, into Social Security. That works out to about $1580 per taxpayer. Clinton wants most of this to go into the trust funds in form of government IOUs, and some to go into stock market investments. If this goes through, 84% of the surplus is already gone.

In addition, over the next 15 years, Clinton wants to dedicate another $700 billion for Medicare. That’s about $47 billion a year, or a little under $ 400 per taxpayer. If Clinton’s Social Security transfusion is approved, only $520 billion of the surplus would be left. He plans to use the IOUs, those special Treasury securities in the Social Security Trust Funds, to pay for this and other government spending. If Clinton’s proposal were approved, we would be borrowing $12 billion a year from the Social Security Trust Funds, or about $103 per taxpayer.

Clinton wants to dedicate another $500 billion for Universal Saving Accounts, new 401k accounts to be added on top of Social Security. That’s about $33.3 billion a year, or about $285 per taxpayer per year. Under this plan, subsidies would be provided in form of direct tax credits for individuals to set up these 401k accounts. Roth already has introduced legislation, the “Personal Retirement Accounts Act of 1999” that would implement this type of account by providing budget surplus subsidies for a period, but not for the full 15 years of Clinton’s plan. The surplus is now gone, and this would be financed out of the IOUs in the Social Security trust funds. Now we’re borrowing about $45 billion a year from the Social Security IOUs, or about $388 per taxpayer.

The current Republican leadership proposal is for an across the board 10% cut in income tax rates. According to the senate Finance Committee, this would mean tax saving of more than $1000 a year for a