- The Washington Times - Monday, July 3, 2000

America is a very rich country that is growing progressively richer. But a larger and larger slice of that wealth is flowing to Washington, where the big spenders have a lot of ideas about how to spend it on bigger government.
The latest fiscal projections from the White House Office of Management and Budget, announced by President Clinton last week, now put the general-fund budget surplus at $1.9 trillion over the next 10 years. This number will likely climb much higher over the coming years as the economy continues to grow, and could easily reach $2 trillion to $2.5 trillion or more before the decade ends.
But bear in mind that this is only the general-fund tax surplus. It does not include the huge amounts of surplus money that is flowing into the U.S. Treasury from the Social Security payroll tax. That will total an additional $2.3 trillion over the next 10 years, and this number will climb significantly, too, as the economy expands.
All told, under OMB's current estimates, the federal government will be raking in $4.2 trillion more than it needs to meet its obligations between now and 2010. If you believe the U.S. economy and the global export economy are headed for much faster growth in the future, then the combined surplus could easily approach or surpass $5 trillion in this decade.
As the late Sen. Everett Dirksen might have said, "now we're talking big money." But it is important to remember that it is coming out of the paychecks, savings accounts and cash registers of the American people. It isn't being produced by the government or by anyone in the Clinton administration least of all by Vice President Al Gore, who claims credit for the surging economy.
No, this giant surplus is being earned the old-fashioned way, by hard-working, frugal, but overtaxed Americans through their productivity, inventiveness and efficiency.
After several years of criticism from free-market economists that the government was low-balling its future growth numbers, the administration is now projecting an average economic growth rate of 3 percent a year. There are many economists who think the annual growth rate will average 3.5 percent and perhaps closer to 4 percent over the next 10 years.
If this is true, we are in for much bigger surpluses than current projections show. Push that 3 percent to 3.5 percent or higher the economy is growing at a 4 percent rate now and Katie bar the door. The revenue landslide will become an avalanche.
It is worth noting that a significant share of the revenue surplus is from capital gains that taxpayers have earned from the stock market. Capital-gains tax cuts that helped to unlock this money, which was reinvested in the Internet economy, was pushed through the Republican Congress over the objections of the administration and the Democrats.
The questions now, of course, are: What are we going to do with these huge surpluses, and how will they affect economic policy and American politics over the coming decade?
First, it is clear that the stronger revenue numbers long predicted by conservative economists like Larry Kudlow, Stephen Moore and other free-market analysts have given increased credibility to Gov. George W. Bush's plan for an across-the-board reduction in federal income-tax rates.
The chief argument by Mr. Clinton, Mr. Gore and the Democrats against cutting tax rates has been that it would not leave enough money to deal with other budget priorities. But with general-fund surpluses heading toward the $2 trillion to $2.5 trillion range, the $1.2 trillion price tag on Mr. Bush's plan will clearly leave plenty of additional money for a broad range of other budget priorities.
The argument that we cannot afford to significantly cut tax rates will look sillier and sillier as the revenue surpluses climb higher and higher.
Second, the huge and growing surpluses from the Social Security payroll tax further strengthens Mr. Bush's case that this is the best time to reform the system to make sure a financially secure retirement program will be there for future generations.
His plan to let workers invest a portion of their payroll taxes, if they wish, in their own stock or bond funds, is a relatively modest one, but it will pay rich dividends for workers in the years to come and put the system on a sounder financial basis.
Finally, one of the most persuasive arguments Mr. Bush makes about using part of the surplus to cut taxes is that it is an "insurance policy," a prudent investment to ensure we continue to have stronger economic growth in the future.
Of all the factors needed to maintain the government's fiscal stability and soundness, none is more important than a dynamic, growing economy that will yield the revenues we will need to keep programs like Social Security and Medicare solvent and safe.
The nation's 100-million-member investor class understands this better than anyone, and it is they who will decide the outcome of the election.


Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.

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