Some Rules for the Surplus
As if more proof were needed that the rules of the federal-budget game have changed, the Congressional Budget Office now predicts a surplus over the next few years far bigger than anyone could have imagined just a few short years ago.
Last Friday, outgoing CBO director June O'Neill predicted to the Senate Budget Committee that Uncle Sam will be $2.6 trillion in the black over the next 10 years. More significantly, almost one-third, or $787 billion, will come from funds that aren't owed to the Social Security Trust Fund. That's money that, if projections are right, is free and clear for Congress to do with as it pleases. Before now, projections showed almost all the surplus coming from Social Security funds.
Politicians all over Washington are already making plans for what to do with the projected cash. President Clinton's call to use most of the surplus to help save Social Security really means not spending the trust fund money on anything else. Instead, he'd pay down the national debt, much of which is owed to the retirement and disability program. Republicans have signed on in principle, while complaining, rightly, that far more will be needed to save Social Security.
The president and his fellow Democrats then want to take the rest of the surplus and devote it to Medicare, private retirement accounts, defense, and education. For their part, Republicans want to give Americans a 10-percent across-the-board tax cut.
No one wants to be the skunk at this garden party. But politicians and the public should keep a few things in mind. First, the non-Social Security part of the budget doesn't show a surplus until 2002. Second, most of the surplus comes in the last few years of the projections. Third, as budget expert Stan Collender of Fleishman-Hillard, Inc., points out, such future estimates are almost always wrong.
Economic forecasting depends on a lot of assumptions, any of which can greatly change the overall picture. In 1993 CBO estimated a $357 billion deficit in fiscal year 1998; there was a $70 billion surplus instead. CBO and administration forecasts were off by an average of $177 billion and $240 billion respectively each year between 1991 and 1998, Mr. Collender notes.
With that in mind, some budget ground rules are in order:
*Don't create any new entitlements, such as federal contributions to individual retirement accounts.
*Reform Social Security and especially Medicare, which is going to take a lot more work than pouring general-fund revenues into a bottomless pit.
*Hold fast to the spending caps outlined in the 1997 balanced-budget agreement and don't spending billions on phony "emergencies," as Congress and the president did last year.
*Find ways to pay for any new spending (read: cuts elsewhere) that don't depend entirely on surplus funds that might not exist five or 10 years from now.