- The Washington Times - Monday, May 22, 2000

The steady stream of good news about the federal budget has only gotten stronger in the last week.

The Congressional Budget Office announced that the federal budget will generate a $40 billion surplus in fiscal 2000, $17 billion more than projected just four months ago.

On Thursday, the Treasury Department asked investors to sell back 30-year Treasury bonds, just the fourth such buyback in 70 years.

And the Debt Clock, a fixture in New York City's Times Square since 1989, will soon be unplugged. During the peak of the federal government's deficit spending, the computer running the clock crashed because it could not keep up. Now, the numbers are slowly winding down.

The difference is that for the third year running, the federal government is operating in the black.

"It is good news," said House Budget Committee Chairman John Kasich, Ohio Republican.

"We should be happy," said Rep. Earl Pomeroy, North Dakota Democrat.

The federal debt is shrinking in two ways. First, Treasury is simply retiring some bonds as they come due. And second, Treasury is buying back some longer-term bonds.

To hear either side tell the story, it might seem the public debt has disappeared as a problem. Both President Clinton and congressional Republicans have written budget plans that project no federal debt by the 2013. The president does so by increasing spending but also raising some taxes. Republicans would cut taxes but also propose cutting spending. Each side says the other's plan is unrealistic and ill-advised.

But others say both sides are getting ahead of themselves.

"You should be happy when you start paying off more principal than interest on your mortgage, but the time to celebrate is when you finally burn your mortgage," Mr. Pomeroy said.

After operating in the red for the last three decades, the federal government has amassed nearly $3.5 trillion in debt or about $13,000 for every man, woman and child in the United States. This debt comes in the form of public bonds, the ones Treasury is now trying to buy back.

But the federal government has also borrowed from some of its own programs.

Bonds held by the Social Security trust fund and other government accounts add up to $2.2 trillion. Measured per capita, that means every American owes another $8,000.

And unlike the public debt, which with even modest spending restraint will continue to decline, debt owed Social Security will continue to mount.

The reason is that money intended to fill the Social Security trust fund is instead being used to buy back public bonds. All sides say that is good for the government's finances but does nothing specifically to set aside the money that will be needed to pay Social Security benefits to baby boomers as they begin to retire in the next decade.

Imagine a family using money intended to fill a college fund to pay off its credit cards. The good news is that the debt is getting paid back, the bad news is that no extra provisions are being made for the future tuition.

Mr. Kasich says "we should not overemphasize the importance of paying off the debt."

He says tax reform favoring savings over consumption, and keeping the size of government down are as important, if not more so, than buying down the debt.

"It is just one part," Mr. Kasich said.

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