- The Washington Times - Thursday, August 30, 2001

Democrats profess to be utterly mortified by the mid-session review of the federal budget released by the Congressional Budget Office (CBO) this week. Instead of having $730 billion over the 2001-2004 period from Social Security surpluses that would be available to pay down the federal debt held by the public, the CBO has estimated that a mere $702 billion would be available. In other words, according to the CBO, current budget policies would require Congress and the administration to draw $28 billion from Social Security's so-called "lock box." A dose of perspective is in order.
In the historic context, it's worth recalling how President Clinton viewed budget policy in the wake of the 1994 election of a Republican Congress. Within weeks of the Republican takeover which occurred, by the way, following a national campaign in which Republicans promised to achieve overall budgetary balance within seven years Mr. Clinton presented Congress a five-year budget plan that he estimated would generate $1 trillion in deficits, including $194 billion in the fifth year. The CBO took one look at Mr. Clinton's budget and added $200 billion to the five-year projected deficits. Only tenacious determination by the Republican Congress produced a unified budget surplus by 1998 and a non-Social Security surplus by the next year.
For a contemporary perspective, it's also worth noting that the CBO analysis wasn't even the most important economic report issued this week by the federal government. The Commerce Department issued a significantly downward revision of its estimate of economic growth for the second quarter, which crawled along at an annual rate of 0.2 percent. Over the past four quarters, economic growth has been a paltry 1.2 percent. Needless to say, the subpar economy that President Bush inherited has caused federal government revenues to decrease. Given the effects of the economic slowdown and the nearly $40 billion in well-timed income tax rebate checks now arriving in mailboxes throughout the country, CBO's downward revisions of budget estimates hardly seem surprising.
If scary is what you want, take a look at the details of the Commerce Department's revised report for the second quarter. Business investment in structures, such as factories, plunged by an annual rate of 13.4 percent after increasing by 12.3 percent during the first quarter. Business investment in equipment and software plummeted by more than 15 percent, following a relatively small 4 percent decline in the first quarter. After falling by only 1.2 percent in the first quarter, U.S. exports plunged by 12.2 percent in the second. With the U.S. economy so close to a recession and the trough not yet in sight, now is surely not the time for Democrats to bemoan favorable cyclical changes in the federal budget that are, in fact, anti-recessionary. This is especially so given the outstanding improvement in budget policy that has been achieved since 1994, when Mr. Clinton offered his five-year blueprint to generate $1.6 trillion in non-Social Security deficits.


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