Congressional observers and Wall Street analysts have once again projected down the U.S. fiscal deficit for 2005, with some believing the deficit could be almost $100 billion smaller than the White House's initial projection from January of $427 billion. Increased tax receipts and stronger than projected economic growth have contributed to the smaller deficit projection. Through May, receipts have increased 15.5 percent as compared to the same period in 2003, outpacing a 7.1 percent increase on the spending side, and the economy grew at a rate of 3.8 percent in the first quarter of 2005. Yet the lower deficit projection is hardly news for celebrating. Even $325 billion - the low mark for projections - would be the third largest deficit in history (the two others, incidentally, were in 2003 and 2004). And despite the better economic numbers, deficits are projected to remain for decades. The Bush administration has hailed the smaller projections as good news and says it is part of the plan to cut the deficit in half by 2009. What the administration does not say, however, is that after 2009, if current policies stay in place, the deficit will start to rise again. The government is currently running a structural deficit, meaning that no matter how larger our economic growth becomes, the current tax code will not be able to bring in enough revenue to pay for current programs, policies, and priorities. This is due to a lack of a long-term outlook for fiscal planning in the government and lack of discipline among the GOP in Congress to resist yet another round of unpaid-for tax cuts. This trend continues to be troubling.

While the legislation proposed by Sen. DeMint has the support of the Ways and Means Committee, it varies slightly from what the House intends to propose in a bill sometime in the future. Both however, will call for the creation of private accounts. The DeMint legislation, according to aides, would end the prevailing practice of reducing the deficit by the size of the Social Security surplus, since the obligations to the accounts would be treated as regular outlays. The government, however, could continue to spend the surplus on other needs, since the money would be invested in treasury bonds (just as payroll taxes are today). His plan also calls for the creation of an independent board which could offer individuals the opportunity to diversify the accounts into stocks or other investments. Chairman of the Finance Committee, Sen. Grassley (R-IA), has not yet specifically endorse the DeMint proposal, and it is unclear as of right now how the Finance and Ways and Means Committees will work together to reach a consensus on these ideas. In a statement, Grassley said, "I want to pass legislation that makes Social Security solvent along with personal accounts if possible, and that obviously goes further than this legislation does." Finance Committee ranking member Max Baucus (D-MT) characterized the DeMint plan as being part of a "bait-and-switch" strategy that will likely see the House approve a private account plan and wrap it in a non-amendable conference report to try to force enactment. House Minority Whip Steny Hoyer (D-MD) released a statement saying the proposal would do nothing to address solvency issues, and "would actually weaken Social Security's solvency by diverting the surpluses that are expected over the next several years and depleting the Social Security Trust Fund even sooner." Baucus' point has been supported by evidence elsewhere, most notably by Jason Furman of the Center on Budget and Policy Priorities. Furman has stated that the DeMint proposal would drain $600 billion from the Social Security trust fund in the first ten years it is in effect. He stated it will also increase the deficit to nearly $500 billion in 2007. Much of the cost would be administrative, with Furman noting that thousands of new federal employees would be needed to administer the accounts. Furman presented many of these points and more in his recent testimony before the Ways and Means subcommittee on Social Security.

Sen. Jim DeMint (R-SC) has revealed a Social Security proposal which includes private accounts. DeMint's plan is cosponsored by Sen. Santorum (R-PA), Sen. Graham (R-SC), Sen. Crapo (R-ID), and Sen. Coburn (R-OK). The Ways and Means Committee also unveiled a proposal today which is quite similar to the DeMint plan. The name of the committee's plan is GROW, or "Growing Real Ownership for Workers," and it attempts to paint the creation of private accounts as more worker-friendly than they really are. Under the plan, workers could elect to have their share of the Social Security surplus set aside in a personal account. Critics point out it does nothing to solve the issue of solvency, which is unarguably the biggest problem facing Social Security. Rep. Jim Kolbe stated "If it's an attempt to get us off dead center, to move us forward, that's fine. But it doesn't fix the solvency [problem]: You'd have to borrow the money from some place else."

While the House is set to finish work all eleven House spending bills by the end of this month, there is pressure on the Senate to figure out a floor strategy to avoid the unruly process that characterized last year's spending negotiations. Next week the Senate is scheduled to work on the Interior-EPA and Homeland Security bills, but after the July Fourth recess the appropriations schedule remains uncertain, according to leadership and committee staff. This Washington Post article from yesterday looks in depth at the Appropriations Chairman - Sen. Thad Cochran (R-MS) and Rep. Jerry Lewis (R-CA) - and what they are hoping to accomplish during this appropriations cycle.