Friday, June 26, 1998

Bigger surplus won’t pay for GOP tax cuts

One reason Washington so often gets into awkward fixes is this: If the numbers don’t support the desired policy, simply change the numbers.

House Speaker Newt Gingrich tried to do just that with the Congressional Budget Office. Desperate to find a way to pay for the GOP’s proposed $100 billion tax cut, he tried to strong-arm the CBO into upping its estimate of the coming budget surplus. Failure to do so, the speaker threatened, would result in a bloodletting at CBO’s expense.

The Republican-run CBO’s numbers, mind you, are the ones Gingrich insisted be used to score President Clinton’s budget.

The CBO’s forecast of the surplus is in the range of $43 billion to $63 billion and, despite the speaker’s mutterings, the CBO says those numbers won’t change when the forecast is revisited next month.

This surplus would be the nation’s second since 1960, its first since 1969, and Congress is showing increasing signs that it will be unable to restrain itself in the face of that windfall. The sensible course would be to apply the surplus to debt reduction, thus freeing the money now spent servicing the national debt, about 16 percent of the budget, and increasing the national creditworthiness.

Desperate for a tax cut

But House Republicans are desperate for political cover, like fudged numbers from the CBO, to tap the surplus for a tax cut. It is a nonpartisan failing. If the Democrats were in charge, they would just as readily tap it to pay for social programs.

As for that old saw about not counting the chickens before they’re hatched, the fact is, the surplus doesn’t officially arrive until Oct. 1, and it is only a surplus by one method of government accounting. If we account for the $100 billion in excess Social Security collections — money the Treasury technically borrows from the Social Security trust funds — the surplus becomes a $37 billion to $57 billion deficit.

Although a year ago the CBO figures would have been seen as almost psychedelically optimistic, there is some evidence they are understated and that the year-end surplus may be as high as $100 billion.

But budget forecasting is an uncertain art, and experience shows that to err on the side of caution is not an error.