Friday, May 29, 1998

Surplus makes good umbrella for rainy days

An old saying, no less true for being a tired cliché, counsels us to save money against a rainy day. Standing in the Rose Garden under a light overcast, President Clinton proudly announced the latest White House estimate of this year's budget surplus -- $39 billion.

The occasion was fraught with politics. The estimate was announced two months early, while Congress was out of town and the Republicans unable to respond effectively.

A GOP spokesman left behind accused the president of low-balling the surplus -- earlier congressional estimates put it at $43 billion to $63 billion -- to take the steam out of Republican plans for a tax cut. That charge showed how much Washington's politics have changed. Normally, a president is attacked for overly optimistic estimates, the so-called "rosy scenario."

Both the president and the Congress give themselves way too much credit for the surplus. Barring ruinous tax policies, their direct influence over the economy is limited to small annual percentage changes in discretionary spending -- about $550 billion out of a GDP approaching $8.5 trillion. That hasn't stopped the president -- education and child care -- and Congress -- highways and tax cuts -- from lining up to spend that surplus.

Fed Chairman Alan Greenspan has it right. The surplus should be used to reduce the national debt, a policy that has served this country well in the past. One day it will rain.