The Amazing, Shrinking Budget Surplus
The Congressional Budget Office has slashed its forecasts of government budget surpluses over the next decade by 80 percent in a report that underscored the recent slide in the U.S. fiscal position and provoked furious pre-election finger-pointing on Capitol Hill.
Congress' nonpartisan budget watchdog projected cumulative surpluses of just $336 billion from 2002 through 2011, down from the $1.7 trillion it last forecast in March. As recently as last year, the CBO was predicting 10-year surpluses of $5.6 trillion, a prospective windfall that has now evaporated.
The "vanishing surplus" has become a hot political issue ahead of November's high-stakes congressional elections, where small voting swings could shift party control of both the House and the Senate.
House Budget Committee Chairman Jim Nussle, R-Iowa, said the new numbers, while not surprising, backed up GOP assertions that Democratic spending plans would "send us down a path to much deeper deficits."
His Senate counterpart, Democrat Kent Conrad of North Dakota, said the president's proposals for spending and tax cuts had "driven us right back into the swamp of deficit and debt as far as the eye can see."
The government will spend more than it collects in each of the next four years and will only move substantially back into the black if tax cuts enacted last year expire in 2010 as scheduled and there is no significant increase in spending, the Congressional Budget Office said.
Three months before the election, Republicans and the Bush administration said the numbers point to a need to restrain spending. Democrats said they reflect the long-term costs of the large tax cuts that President Bush pushed through Congress last year and are evidence that they should not be made permanent.
"Without the tax cuts, the budget would not invade the Social Security trust fund surplus over the 10-year period," said Rep. John Spratt of South Carolina, top Democrat on the House Budget Committee.
The CBO projected that this fiscal year's budget deficit will hit $157 billion, the result of "a sharp decline in tax revenues coupled with double digit growth in spending." It said the outlook for fiscal 2003, starting Oct. 1, was a budget shortfall of $145 billion, and that the federal ledger will only return to the plus side with a $15 billion surplus in 2006.
The White House last month put this year's deficit at around $165 billion.
The return of deficit spending this year, the first since 1997 and after a $127 billion surplus in fiscal 2001, is generally attributed to the fragile economy, the shaky stock market and the government's response to the Sept. 11 terrorist attacks. Democrats also blame the 10-year, $1.35 trillion tax cut that President Bush pushed through last year.
Mitch Daniels, director of the White House Office of Management and Budget, said the CBO report confirmed that the recession, the weak stock market and the war against terrorism caused the deficit.
But he added that "it does show a turn back toward balanced budgets with the right choices," including President Bush's efforts to revive the economy, fight terrorism and restrain spending.
The budget numbers are likely to become a factor in the upcoming elections, with the parties blaming each other for frittering away a budget surplus that only 18 months ago was estimated at $5.6 trillion through 2011 if Social Security money is included.
It now appears inevitable that the government will have to dip into Social Security surpluses to pay for other programs, an action both parties have pledged to avoid doing.