Huge Decline Seen in Budget Surplus Over Next Decade
" In a report completed on Friday, the Democratic staff of the House Budget
Committee estimated that the surplus for the 10 years ending in 2011 would be
$1.79 trillion, compared with a projection by the Congressional Budget Office a
year ago of $5.61 trillion for the same period. "
....................................................................................................
"Both the Democratic and Republican figures show the government dipping into the
Social Security surplus to pay for general government operations for most of the
decade, significantly reducing the amount of money available for debt reduction. "
New York Times
January 6, 2002
POLITICS
By RICHARD W. STEVENSON
WASHINGTON, Jan. 5 - Analysts
from both parties say the
budget surplus for the next decade
has shrunk to less than a third of
what was projected a year ago, setting
up an especially intense partisan
battle over taxes and spending in the
midst of an election-year recession.
As the Bush administration and Congress prepare to debate a new round of budget
proposals, the analysts said the government's $2 trillion annual budget was likely
to end up tens of billions of dollars or more in the red for each of the next several
years before returning to surpluses for the rest of the decade.
The government will end up in deficit for at least the next few years, they
predicted, despite pressure from the White House for budget cuts or freezes in
many areas outside the campaign against terrorism.
"We're a world away from where we were at this time last year," said Representative
John M. Spratt Jr. of South Carolina, the senior Democrat on the House Budget
Committee. "I'm not sure how you solve this equation, arithmetically or politically."
The new figures, developed separately by the Democratic staff of the House Budget
Committee and the Republican staff of the Senate Budget Committee, are an effort
to predict official figures to be released by the nonpartisan Congressional Budget
Office this month and the White House's Office of Management and Budget next
month.
The numbers developed by the two staffs are very similar.
They provide a clear sense of the scale of the reversal in
the nation's fiscal fortunes in the wake of the economic
downturn, the Sept. 11 attacks and the $1.35 trillion tax
cut President Bush pushed through last year over
opposition from most Democrats.
With the money drying up and Democrats and
Republicans facing painful choices between cutting the
budget and abandoning any pretense of fiscal responsibility, the political and
economic considerations are complex.
Democrats have attacked the Bush tax cut, arguing that it has sliced deeply into
the surplus, and they are trying to link it to the recession by suggesting that the
resulting budget problems are keeping long- term interest rates higher than they
would normally be during a downturn.
Mr. Bush and Republicans on Capitol Hill are defending the tax cut as appropriate
medicine for the weak economy and using the figures to increase pressure on
Democrats to hold down spending increases.
In his weekly radio address, President Bush said he would meet with his economic
advisers when he returned on Monday from a trip to California and Oregon, "to
discuss the latest economic data and work for a quick recovery for our economy."
He urged Congress to act on his proposals, which include further tax cuts and
provisions to benefit unemployed workers, ideas that would further increase the
deficit.
With surpluses apparently having given way to deficits in the short run, and with
the long-term surplus a fraction of what was anticipated a year ago, both parties
are being forced to scale back plans for initiatives like providing retirees with help
buying prescription medicine.
They also seem to have little chance of making good on their pledges to use the
part of the budget surplus generated by Social Security to pay off most of the $3.3
trillion national debt in the next decade.
In a report completed on Friday, the Democratic staff of the House Budget
Committee estimated that the surplus for the 10 years ending in 2011 would be
$1.79 trillion, compared with a projection by the Congressional Budget Office a
year ago of $5.61 trillion for the same period. The 10-year outlook is likely to be
slightly brighter in the forecast the Congressional Budget Office will release this
month, because that projection will add the estimated surplus for 2012 and drop
the presumed deficit for this year.
The Democratic analysts said the budget for the current fiscal year, which ends
Sept. 30, was on track to run a deficit of at least $3 billion. That figure, though,
rests on the assumption that Congress and the administration do not increase
spending on the war, domestic security and programs like aid to farmers.
More likely, the Democrats said, the deficit this year will be a minimum of $15
billion once those issues are addressed, and much more if the two parties agree on
an economic recovery package. Just a month ago, the two parties were considering
economic stimulus plans that would have cost as much as $90 billion this year.
For next year, the Democratic analysis said, the deficit would be at least $43 billion
and more likely would be $70 billion or above.
In a report completed last week, the Republican staff of the Senate Budget
Committee estimated that the surplus for this fiscal year through 2011 would be
$1.86 trillion.
The Republican analysis showed the government eking out a $1 billion surplus
this year and next year. But because that projection did not account for the near
certainty that Congress would approve more money for fighting the war and for
other issues, Republicans said they assumed the budget would end up tens of
billions of dollars in deficit for those years, especially given the election-year
pressure on both parties to increase spending.
"It puts a lot of things in a tight box," said G. William Hoagland, the Republican
staff director for the Senate Budget Committee.
Both the Democratic and Republican figures show the government dipping into the
Social Security surplus to pay for general government operations for most of the
decade, significantly reducing the amount of money available for debt reduction.
"If we had one agreement that was bipartisan and bicameral, it was that we would
save the Social Security surpluses by buying up the national debt," Mr. Spratt said.
"As you go through these numbers, you see any hope of accomplishing that
dashed."
The worsened fiscal outlook has created a bind for Mr. Bush, whose team is
completing the budget plan he will submit to Congress on Feb. 4, covering the
fiscal year that starts on Oct. 1. Mr. Bush is scheduled to meet in the coming week
with his budget director, Mitchell E. Daniels Jr., to sign off on the final numbers.
Mr. Daniels said he expected the administration's deficit and surplus projections to
be similar to those of the Congressional Budget Office and those developed by
analysts within the two parties. He said that the 10- year surplus projections would
be scaled back substantially, and that for the next two years the budget would be
roughly in balance before the costs of any new initiatives.
Mr. Daniels said the budget that Mr. Bush will submit will call for overall growth in
spending, primarily by increasing financing for the Pentagon and for domestic
security programs.
"You can look for the rest of government to grow, but much more slowly," he said. "
Administration officials said that programs like the National Science Foundation
and the Women, Infants and Children program, which provides healthy food to
poor children and pregnant women, would get more money under their plan.
But Congressional aides from both parties said the administration has signaled
that it intends to freeze or cut many other programs, including the Smithsonian
Institution and the Army Corps of Engineers, all of which have powerful patrons
inside and outside Congress.
Senator Kent Conrad, the North Dakota Democrat who is chairman of the Budget
Committee, said the budget squeeze was a direct result of Mr. Bush's tax cut,
which he said was sold on the basis that last year's surplus projections were, if
anything, too pessimistic.
"Now we're seeing real consequences, in terms of seeing a flood of red ink facing us
not just this year but for years to come," Mr. Conrad said.
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