- The Washington Times - Monday, May 1, 2000

The news that the federal budget surplus will be $210 billion this year, a whopping $40 billion more than earlier forecasts, is the strongest evidence to date of the necessity of cutting taxes.
The government's new projection, based on the flood of tax revenue that is surging into the U.S. Treasury, has stunned budget officials and makes previous estimates laughable in comparison. The White House Office of Management and Budget had forecast a $167 billion surplus, while the Congressional Budget Office had put this year's surplus at $179 billion.
In fact, this year's projected tax surplus after all the bills are paid will far exceed last year's record $124 billion surplus. And the chances are good that this year's surplus will be even higher than $210 billion, perhaps $235 billion or more.
The reason is the booming American economy (which raced along at an average annual growth rate of 5.4 percent in the first quarter), and a tidal wave of capital-gains earnings from last year's stock market rise.
Ronald Reagan's firm belief that tax cuts would spur strong, long-term economic growth and boost tax revenues enough to erase the deficits has proven true. The surpluses are a direct result of the tax cuts in the '80s that launched many of the fast-growing businesses that have been the driving force behind our present growth rates.
These fatter-than-expected revenue numbers are good news for George W. Bush, who wants to give about one-fourth of the estimated $4 trillion in total government surpluses back to taxpayers over the next 10 years. It is now going to be very difficult for his critics to argue that the feds cannot afford to give some of the surpluses back when they continue to grow at unprecedented rates as I believe they will.
Why? Because the fundamentals in our economy point to long-term growth. We continue to have a modest inflation rate. Unemployment is at a 30-year low. We enjoy a largely deregulated economy that remains open to foreign investment and free trade. We have the strongest stock market on the planet, with a growing investor class pouring new money into mutual funds at record levels. King Dollar remains strong, and the world is hungry for American-made products.
Consumer confidence is high, and retail sales have been spectacular. Orders for U.S.-made durable goods rose by a faster-than-expected 2.6 percent in March, after two down months. Corporate earnings have been very strong.
All this has boosted incomes, and that in turn has driven up the budget surpluses to record levels. The surpluses are likely to get bigger, and that is going to intensify the debate over what to do with them.
Unlike Mr. Bush, Al Gore doesn't want to give any of the surplus tax revenue back to the taxpayers. The reason, he says, is that he wants to use most of the money to pay off the debt and to strengthen and preserve the Medicare and Social Security funds something he charges Mr. Bush's plan would not do.
But Mr. Gore, who is given to gross exaggeration and misrepresentation, distorts Mr. Bush's plan. He is being less than truthful about the surpluses, where much of the money is really going, and what he would do with it.
More than $2 trillion of the surplus comes from Social Security payroll taxes, the revenues from which are piling up much faster than expected, extending the retirement program's solvency beyond what actuaries had predicted.
Medicare's solvency has been significantly extended, too, because of the increased payroll-tax revenue pouring into the Treasury.
The truth is that Mr. Bush's tax-cut plan dedicates all of the $2 trillion in Social Security surpluses to pay down the debt (not a good use of all of this money, in my opinion). But that leaves another $2 trillion in non-Social Security surpluses over the next 10 years, one-half of which Mr. Bush wants to use to cut taxes, leaving the rest for other budget priorities and contingencies.
Mr. Bush's tax-cut plan is not "casino economics," as Mr. Gore charges. It is "growth economics," aimed at boosting capital formation, investment, productivity, and the incomes that will produce the tax revenues needed to keep Social Security and Medicare solvent while they undergo market reforms (such as moving to a system of personal retirement accounts).
But to counter Mr. Gore's distortions, Mr. Bush needs to explain why more economic growth is the only way to produce the tax resources needed to keep these two programs from plunging into insolvency when Baby Boomers begin demanding their benefits in the coming years.
There is another reason Al Gore is against tax cuts. He wants to spend the surpluses on a raft of new social-welfare legislation. A three-page list compiled by the Bush campaign shows that all of the big spending proposals Gore has made thus far in his campaign would cost a whopping $1.9 trillion over the next 10 years about twice the cost of Mr. Bush's tax cuts.
I think Mr. Gore's big-spending wish list, which will eat up nearly half the budget surpluses, will be one of the major issues of this campaign.
That's why Mr. Bush needs to tell voters that spending the surpluses, as Mr. Gore would do, will undermine Social Security and Medicare. And that only increased economic growth, spurred by future tax cuts, can ensure their survival.

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

Sign up for Daily Newsletters

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide