- The Washington Times - Sunday, February 4, 2001

The Congressional Budget Office (CBO), the legislative branch's authoritative, nonpartisan budget forecaster, released its latest projections this week, and they were nothing short of stunning. From fiscal year 2002 through fiscal year 2011, the CBO projects that cumulative federal budget surpluses will total $5.61 trillion, reflecting an annual average of more than $500 billion. That projection represents an increase of more than $1 trillion compared to its previous 10-year forecast, which was issued in July.

Significantly, more than 90 percent of that $1 trillion-plus increase occurs in the non-Social Security portion of the federal budget. Recall that both Republicans and Democrats have pledged not to use Social Security surpluses to finance any other program. Thus, any tax cuts or increases in federal spending would have to be financed by the non-Social Security surpluses. Over the next 10 years, the CBO projects that cumulative non-Social Security surpluses will total $3.12 trillion.

All of a sudden, President George W. Bush's 10-year, $1.6 trillion tax cut, which represents only half of the projected non-Social Security surpluses, seems extremely moderate. Not only would the $2.49 trillion in Social Security surpluses projected over the next 10 years continue to be available to retire nearly 80 percent of the $3.15 trillion in publicly held federal debt that will still exist after fiscal 2001. But more than $1.5 trillion would also remain from the $3.12 trillion in non-Social Security surpluses after enactment of Mr. Bush's $1.6 trillion tax cut. That $1.5 trillion could be used to finance additional tax cuts, a prescription-drug benefit in a reformed Medicare program, national missile defense and other spending priorities.

The CBO analysis also confirmed the concerns expressed by Federal Reserve Board Chairman Alan Greenspan in his recent testimony before the Senate Budget Committee. In emphatically endorsing Mr. Bush's idea of enacting a major tax cut, if not all the specifics of Mr. Bush's plan, Mr. Greenspan warned that projected surpluses were becoming so large that the federal government might soon be compelled to begin acquiring hundreds of billions of dollars worth of private assets, i.e., stocks and bonds of private corporations. Noting that annual surpluses recently projected by the Office of Management and Budget peaked at about $800 billion in 2011, including a $500 billion non-Social Security surplus that year, a projection the CBO confirmed, Mr. Greenspan argued that action in the form of a major tax cut needed to be taken pre-emptively. Warning of the consequences of socialist policies, Mr. Greenspan bluntly told the committee, "Having the federal government hold significant amounts of private assets would risk sub-optimal performance by our capital markets, diminished economic efficiency and lower overall standards of living than would be achieved otherwise."

Indeed, according to the CBO, Social Security surpluses "alone would be sufficient to eliminate the available debt by the end of the 10-year period." This fact makes it virtually impossible to argue that allocating only half of the cumulative 10-year non-Social Security surpluses for tax relief is excessive.

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