Surplus Serendipity ... and Cupidity
Lambro, Donald, The Washington Times (Washington, DC)
The mounting budget surpluses being forecast open up a new era of surplus politics in America. The era of deficits is over. The era of lower tax rates and uninterrupted, robust economic growth is at hand.
With huge tax revenue surpluses stretching throughout the next decade and beyond, across-the-board income tax cuts and private Social Security retirement accounts are now not only possible but will very likely be enacted.
Even President Clinton, perhaps seeing the handwriting on the wall, did not rule out future tax cuts last week when he released the administration's own forecasts of $1.5 trillion in surpluses over the next 10 years. And Republican leaders, who are divided over this year's tax cut agenda, appear to be united on what to do with the coming surpluses: Give the money back to the American people who earned it in the first place.
The size of the surpluses, produced by a growing economy and a modest slowdown in government spending, will be stunning - much higher than the government figures suggest.
The White House's recent forecast of a $39 billion surplus this year is well below the Congressional Budget Office's estimates of as much as $63 billion. But higher budget baseline estimates presented to GOP congressional leaders by economist Lawrence Kudlow and Stephen Moore are forecasting a $1.1 trillion surplus in just the next five years and they think it could be much more than that.
"Budget surpluses for the next several years are going to be much larger than either the Congressional Budget Office or the Office of Management and Budget predicted," they said in a private memorandum for House GOP leaders.
The reason: Fueled by 3.5 percent economic growth, tax receipts are soaring, up by 11 percent over last year. Revenues from lower capital gains tax rates, as supply-siders predicted, are a big factor. Low unemployment is another. Government payouts for unemployment, food stamps and welfare are down. The administration estimates that federal spending this fiscal year is actually $3.1 billion lower than was estimated in February. And revenues of $1.7 trillion are $45.9 billion higher than they expected.
But Messrs. Kudlow and Moore say White House and CBO lower surplus projections are based on growth estimates that are too low. Last year's five-year budget deal between Mr. Clinton and GOP leaders was based on 4 percent revenue growth. "But over the past five years we've had 7 percent revenue growth. This year, we're up 11 percent," the two economists said. …