- The Washington Times - Sunday, January 27, 2002

In recent weeks, both Senate Majority Leader Tom Daschle and his sidekick, Sen. Edward M. Kennedy, Massachussets Democrat, have thrashed the Bush White House for squandering the budget surpluses of the Clinton era. To preserve the surplus, they want to shelve the future tax cuts, including the elimination of the death tax, in the Bush tax plan.

All of these recriminations about the return of federal deficit spending would be encouraging except that it lacks even a seed of sincerity. Indeed, both Mr. Daschle and Mr. Kennedy have requested $50 billion in additional spending this year. And that comes on top of the 11 percent increase in spending Congress already approved this year.

One year ago, the Congressional Budget Office predicted that the budget surplus for 2002 would be $331 billion. Now, Congress is forecasting a $21 billion deficit for the year. That's a lot of fiscal slippage in just one year. What in the world happened? Who lost the surplus? Mr. Daschle and Mr. Kennedy both contend that the major factor behind the evaporating surplus is President Bush's tax cut. They are wrong.

Four factors caused the surplus shrinkage (see the accompanying chart). Only one of those factors was the tax cut. But it accounts for less than $40 billion in tax relief this year, out of $2 trillion in tax revenues the government will extract from workers and businesses. That's a 2 cent tax cut out of every dollar paid. This crumb of a tax cut is what the Democrats are all hot and bothered about.

The recession accounts for about two-thirds of the surplus disappearance. For 2001, revenues dropped 1 percent, and they won't rise much above 3 to 4 percent this year. That compares with the 8 to 10 percent growth in revenues during the prosperous late 1990s. We've lost about $160 billion in expected revenues for 2002, because 1.5 million fewer people are working and because fewer businesses are making profits for Uncle Sam to tax.

A government spending spree is the most controllable factor behind the deterioration of the budget outlook and accounts for 19 percent of the lost surplus. Congress is spending money at a faster pace than at any time since the 1970s. A lot of that spending blitz has been a result of the big surpluses. Appropriators interpreted all that money lying around in the Treasury as an invitation to spend.

What is clear is that Mr. Daschle and Mr. Kennedy are wrong when they say the primary blame for the fiscal deterioration is the Bush tax cut. By far the biggest factors have been the recession and increased federal spending. In fact, if this year Congress would just hold spending to the level of inflation, there would be at least a $50 billion surplus.

It turns out that about half of the increased spending (over the 4 percent Congress had originally predicted) was a result of the military and home security expenditures required to fight the war on terrorism but only half. As the Congressional Quarterly recently noted: "Although the need to respond to the September 11 terrorist attacks accounted for much of the increased spending, Congress was poised for a big spending boost even before then."

There is reason to worry that the recent fiscal deterioration on the outlay side of the federal ledger may be the start of a longer term trend of pro-spending policies in Washington. Since 1995, when Republicans first took control of the House and Senate, spending discipline has eroded with every passing year. One indication of this erosion of fiscal restraint is that when Republicans first took Congress in 1995 there were some 500 members of the House and Senate who wanted to cut spending more than they wanted to increase it, according to the National Taxpayers Union calculations. But in 2000, there were exactly two advocates of smaller government. The other 533 House and Senate members wanted bigger government. Only Ron Paul, Texas Republican, and Jim Sensenbrenner, Wisconsin Republican, voted for less overall spending.

Jeff Flake, a freshman Republican from Arizona, recently complained to me that every vote he has taken in Congress has been for more government programs and more spending. "I'm still waiting," he says, "for a vote to cut the budget."

He may have to wait for a long while.

In his State of the Union address, Mr. Bush must call for a comprehensive reform of the federal budget process to put reasonable caps on government spending as most states do. Surpluses need to be immediately and automatically returned to taxpayers, before these dollars can be ingested by the appropriators. The president needs a line-item veto.

Most importantly of all, he needs to tell the American people the truth about who lost the budget surplus. Deficits are back, not because of the tax cutters, but because of the big spenders in Congress the same crowd whose profligacy created the enormous deficits of the 1970s, '80s and '90s. The Daschles and Kennedys of the world need to be hog tied before a new spending spree creates another trillion of debt for our children to pay off.

Stephen Moore is a senior fellow at the Cato Institute.

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