- The Washington Times - Thursday, July 12, 2001

The Democrats’ attempt to convince the American people that President Bush’s tax cuts have squandered the budget surpluses is about as dishonest as things can get in this town.

No one, certainly not the Bush administration, disagrees that tax revenue, and thus the surplus, has dipped as a result of the economic slump that began last year. But the surpluses will still be immense.

“By any measure we have huge surpluses, and it is disingenuous to tell the public otherwise,” says Chris Ullman, spokesman for the White House Office of Management and Budget, which keeps track of the government’s spending and revenue numbers.

Even with a dip of $50 billion or so in the surplus, there is still a total unified budget surplus of between $150 billion and $200 billion this fiscal year. (The current fiscal year ends Sept. 30.) “We’re still talking about roughly $1,100 for every man, woman and child in the United States,” says Scott Hodge of the nonpartisan Tax Foundation.

The statistical shell game that Democratic leaders such as Senate Majority Leader Tom Daschle of South Dakota and Senate Budget Committee Chairman Kent Conrad of North Dakota are playing is based on what might be called “snapshot” math. They look at a few months of declining tax-revenue figures and hysterically extrapolate that this is the way it will be for years, that the government is going to lose needed revenue over the long term.

Their solution is to “revisit” the tax cuts meaning to reduce or repeal them in order to boost spending.

This is a little like telling people who saw their 401(k) plans, mutual funds and other retirement investments decline over the past year and most did that they should stop putting money into them because it is a losing proposition. Mr. Daschle actually makes this argument against personal Social Security investment accounts when the market periodically falls.

But it is foolish to judge investments on the basis of a few months or a year. People will not lose money in the stock market over their working lives, and the government’s budget surplus will not continue to decline over the next 10 years of the Bush tax cuts. The government’s revenue, like the economy, will continue to grow over time, despite periodic ups and downs.

“Even with the tax cut, we still estimate that there will be a nearly $1 trillion surplus over the next 10 years” after paying the debt, Social Security, Medicare, defense and all the rest in the budget, Mr. Ullman told me this week. “We do acknowledge that the weak economy has made the budget surplus tighter in the short term, but we believe there will be a surplus in the short term this year and next, and over the long term.”

So what are the Daschle Democrats saying when they attack the administration because of the temporary decline in the surplus? They profess concern about future deficits. But if they are really worried about deficits, why are they pushing for higher federal spending on just about every front?

In the pending education bill alone, Ted Kennedy and most other Democrats want to boost federal spending by $30 billion, which would bust the budget ceiling Congress agreed to earlier this year. There are now more than 13,000 earmarked pork projects being proposed in pending appropriations bills, items that were not requested by the departments and agencies of government.

“All this calls into question their credibility about their concerns about the surplus,” Mr. Hodge says.

Mr. Conrad’s specious budget numbers are based largely on a static analysis that rejects the idea that tax cuts will lead to economic growth, as they have every time they have been tried.

By calling for “revisiting” the Bush tax cuts and, presumably, repealing them, Mr. Daschle and Mr. Conrad are proposing that we raise taxes in a weak economy, something no business economist anywhere would recommend.

Moreover, the Democrats’ argument that the tax cuts have led to the latest reduction in the surplus is absurd on its face. The first signs of falling revenues began to appear this spring, when the tax-cut legislation was still being debated. While the tax cuts are now law, the rebate checks for the retroactive part of the cuts have not yet been mailed out, and the lower withholding rates only took effect last week, so neither has had any impact on revenues.

Nor can this summer’s preliminary tax cuts be blamed for any decline in the surplus, because most of the Bush tax-cut plan will not kick in until four to six years from now.

“For most of this fiscal year, we’ve been operating under the higher tax rates,” says Mr. Hodge. And it is the higher tax rates that have been the chief drag on the economy, robbing it of investment capital, which is critical to a healthy, thriving, growing economy.

So, yes, government revenues do decline when the economy weakens, as they do in every business downturn. But when the economy picks up again, as it will by year’s end, revenues will rise again. And that will happen because of the pro-growth tax cuts that Mr. Daschle and Mr. Conrad still want to kill.

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