By JANE BRYANT QUINN

A federal budget surplus appears to be a sure thing. If tax revenues stay strong, it might even come as early as this year, according to the Congressional Budget Office.

The budget that President Clinton presented in January projects a small deficit this year but a cumulative surplus of $218.7 billion by 2003.

What’s to be done with all this money? The hawks say, “cut taxes.” The doves say, “beef up education and child care.” Both say, “build roads.”

The president proposed some of each in his State of the Union message. But on paper, the funding for Clinton’s initiatives comes from other sources (spending reductions, assorted tax hikes, a settlement of the tobacco lawsuits).

The budget surplus itself, he said, should be used to “save Social Security first.” Clinton doesn’t even call it a surplus. His budget lists it as a “Reserve Pending Social Security Reform.”

The president’s move has complicated life for tax-cutters and social spenders alike.

If they touch the surplus oops, I mean, the Social Security “Reserve” they risk being charged with swiping money that baby boomers are going to need when they retire. Any tax cuts or increased spending will have to be funded in other ways.

But guess what? Under current law, the budget surplus cannot be used to save Social Security or for that matter, Medicare. Once the government’s current bills are paid, any surplus is automatically applied to reducing the $3.8 trillion national debt.

For complicated accounting reasons, the debt won’t actually decline for another two years, even if the projected surpluses arrive on schedule.

Starting in 2001, however, the feds would no longer roll over every Treasury security that matured. Some would simply be retired. By 2003, according to the president’s budget, the national debt would be $145 billion smaller than it is today.

So how might Social Security get a piece of this action? First, a quick summary of its current finances.

Social Security has been running a plump surplus of its own. We pay more in payroll taxes than is spent on current benefits. The extra money goes into a trust fund, which, by law, is invested in special U.S. Treasury bonds.

Scaremongers tell you that Social Security’s trust fund has been pillaged. Absolutely untrue. Those bonds are 100 percent secure, as are any other Treasuries that investors buy. The government will not default.

Around 2019, Social Security will start redeeming its Treasury bonds, in order to pay current benefits. If nothing changes, the trust fund runs dry around 2029, according to current projections.

In 2029 and beyond, Social Security still would receive a steady stream of payroll taxes. But the taxes would cover only 75 percent of the future benefits due.

President Clinton hasn’t proposed a bailout plan. He wants public discussion during this election year, followed by political negotiations in 1999.

Whatever happens, the program itself still has to be reformed, says Gene Sperling, director of the president’s National Economic Council. The country can’t assume that future surpluses will magically come to the rescue.

Trims in benefits and modest tax hikes probably are in the cards. But surpluses, well used, might ease the pain. Among the options, all of which would require a change in law:

1) The interest saved by reducing the national debt might be credited to the Social Security trust fund. That could go toward improving Social Security’s long-term solvency.

The drawback: The trust fund would have to invest that interest income in Treasury securities, so the government still would show surplus cash. That cash would eventually get used, for tax cuts or social spending.

2) The trust fund could be given the surplus and allowed to invest it in corporate stocks and bonds. That would put the money beyond Congress’ reach, as well as providing Social Security with higher long-term returns.

The drawback: It’s unclear how to prevent Social Security’s investment policy from unduly influencing the private economy.

3) The surplus could be used to help pay current Social Security benefits. That would free up some of each worker’s payroll tax, to be deposited in a personal retirement account. This is partial privatization. You’d control how that money was invested.

The drawbacks: You’d retire poorer if your investments crashed. If you divorced, you and your ex might divide this fund, leaving both of you less than Social Security might have paid.

More plans will pop up. In the meantime, any surplus will cut the national debt. No harm in that.

Medicare changes

For those devoted to personal freedom, here’s a question to consider: Should doctors be free to ask Medicare patients to pay personally for bills that could have been paid by Medicare? And should these docs be able to charge more than Medicare allows?

That’s what will happen, if Congress passes a bill introduced by Sen. Jon Kyl, R-Ariz. Kyl’s bill has been cast as an issue of “patient’s rights.” It’s your “right” to pay whatever you want for the service you want. Big Brother has no business limiting doctor bills on your behalf.

Maybe seniors are secretly eager to pay more, but I doubt it. This bill is actually for doctors who want to escape from Medicare’s cost controls, and for people who generally oppose government rules.

Under the Kyl bill, doctors could tell their Medicare patients that they have to sign private contracts for care. The contracts would cover specific services, which you’d have to pay out-of-pocket. Other bills would still be submitted to Medicare.

What might doctors insist that you pay for yourself? Maybe X-rays, medical tests or specialty treatments. Seniors might also be billed separately for phone calls and office paperwork, something not allowed today.

“Medicare protects people,” says Diane Archer, head of the Medicare Rights Center in New York City. “Any law that lets doctors raise their fees will make health care less affordable and undo this protection.”

Backers of Kyl say that seniors are too savvy to agree to pay more than the Medicare limit. But will all seniors know that contracts with doctors don’t have to be signed? Especially if your doctor says that his or her costs have gone up and this is the office’s new rule?

If doctors really thought they couldn’t get seniors to pay, they wouldn’t bother backing this bill.

Syndicated columnist Jane Bryant Quinn can be reached in care of the Washington Post Writers Group, 1150 15th St., Washington D.C. 20071-9200.