Spending a phantom surplus Politics as usual: Clinton, Congress talk tax cuts but ignore realities of federal budget.

January 03, 1998

THERE'S A SURPLUS coming! That's the rallying cry in Washington, as both Republicans and Democrats line up to disburse this money even before it is collected. Indeed, that surplus may not arrive for several more years -- if ever. Yet officials are already politicizing the issue and ignoring the true federal budget picture.

Yes, this nation's strong economic growth is whittling down the federal deficit faster than anyone expected. Some private economists think a $40 billion surplus is possible by Oct. 1, though a more conventional view is a continuing deficit in the $20 billion to $30 billion range.

Even that is a remarkable turnaround. When Bill Clinton took office, a $570 billion deficit was projected for 2002. A combination of spending restraints, tax increases and a continuing surge in revenues have reversed those predictions. The good economic numbers made possible a balanced budget agreement last spring that foresaw a surplus in 2002 -- even after a massive tax-bill package was approved.

Before politicians start spending this excess revenue or again cut the taxpayers' burden, some hard facts ought to be examined: Any expected surplus will vanish as soon as this nation's economy hits a rough spot and tumbles into recession. If federal politicians aren't careful, huge deficits could return.

Another major tax cut, or new spending initiatives, will only worsen the deficit situation in a recession.

Any surplus would be an illusion of federal accounting. A fat build-up in Social Security accounts masks a deficit-situation in the rest of our national government.

Mounting Medicare medical costs and the narrowing surplus run up each year in Social Security accounts cannot be ignored forever. Indeed, higher Medicare expenses (doubling over the next eight years to $458 billion) could overwhelm hopes for fat surpluses in the early part of the next century.

No one in Washington is focusing on these budget truths. Instead President Clinton and Republicans in Congress are discussing middle-class tax cuts, new programs and other ways to spend a phantom surplus. Much of this is election-year propaganda. But if political expediency prevails, lawmakers could wind up mortgaging the country's future fiscal well-being for short-term partisan gain.

A wait-and-see attitude is the only sensible approach. The best statistical minds in the country haven't been able to make accurate forecasts of the federal balance sheet; indeed, their estimates have been wildly off-base in recent years. That should be a signal to legislators and the president to move with extreme caution in spending a surplus that so far is more political hype than reality.

Pub Date: 1/03/98

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