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Jewish World Review Jan. 20, 2000 /13 Shevat, 5760

Morton Kondracke

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Big New Surplus Estimates Could Alter 2000 Politics -- THE GOVERNMENT'S BUDGET SURPLUS apparently will be double previous estimates, possibly transforming the 2000 Congressional session and the presidential debate.

The Congressional Budget Office reportedly is getting set to hike its 10-year non-Social Security surplus estimates by $600 billion to $1 trillion, which should intensify the scramble between Republicans advocating tax cuts and Democrats advocating new spending.

The new numbers also will encourage some Members in both parties to advocate faster paying-down of the national debt or even eliminating it, which is now possible.

In the presidential race, the immediate beneficiaries of the CBO's budget bonanza ought to be Texas Gov. George W. Bush (R) and ex-Sen. Bill Bradley (D-N.J.), whose expensive tax cut and health reform proposals suddenly become more affordable.

But aides to their opponents, Sen. John McCain (R-Ariz.) and Vice President Al Gore, don't accept that idea - and continue to argue that Bush and Bradley are over-spending even the new surplus figures.

CBO is scheduled to issue its new estimates Jan. 27, but details are leaking out from Congressional staffers. According to these sources, for fiscal 2000 - the current year - the so-called "on budget" surplus will be $20 billion to $30 billion, allowing Congressional Republicans to assert correctly that they passed a spending plan that did not dip into Social Security revenues.

Previously, CBO had calculated that spending would exceed tax revenues by between $15 billion and $20 billion - which Democrats were claiming proved that Republicans were fiscally irresponsible.

All the new estimates are based on the nation's economic surge, which CBO is calculating will produce an average annual growth rate of 2.8 percent over the next 10 years, .4 percent higher than its previous estimates.

Last July, CBO estimated that the nation's total budget surplus - counting both Social Security ("off budget") revenues and "on budget" accounts - would be $3 trillion over 10 years.

Now, CBO reportedly is getting ready to say the Social Security surplus will remain at about $2 trillion, but that the "on budget" number will be nearly $2 trillion - double the estimate last year.

Over the next five years, CBO figures, the surplus would be about $600 billion - also double previous estimates.

There is a big qualifier in this estimate, though. It assumes that for the next two years, spending will be restrained in accordance with budget caps enacted in 1997.

In reality, however, the caps have been broken in each of the last two budgets - by $35 billion this year - and are even more likely to be exceeded in a big-surplus environment.

Moreover, for fiscal 2001, the budget to be enacted this year, meeting the caps would be extra difficult, requiring cuts in current programs of more than $50 billion.

Another way CBO calculates surpluses is to assume that the caps don't hold, but that spending programs will be frozen at current levels and won't rise with inflation. This would produce a slightly smaller surplus - $1.8 trillion over 10 years and $380 billion over five years.

The third and most realistic means of calculating, though, is to assume that existing programs aren't cut and instead grow at the rate of inflation.

By this measure, CBO had been figuring the 10-year on-budget surplus at $247 billion. Now, that number has been boosted to between $850 billion and $900 billion - giving policymakers between $600 billion and $650 billion more to spend, give back in tax cuts or save to pay down the debt.

Bradley estimates that his plan to provide health insurance to all Americans would cost $650 billion over 10 years. Bush's tax cut would cost $1 trillion. And last year, Congressional Republicans passed a tax cut of $792 billion that President Clinton declared fiscally irresponsible and vetoed.

In spite of the new money CBO is conjuring up, Gore, McCain, the White House and Congressional Democrats are not budging from their previous opposition to their foes' proposals.

Gore's press secretary, Chris Lehane, told me, "Bradley still wants to spend a lot of money on a bad plan. And our position on the economy is that it's better to err on the conservative side and if money turns up you didn't expect, the benefits are on the upside."

McCain contends that it will take $5 trillion more than the anticipated Social Security surpluses to keep the retirement system solvent for the baby boom generation and accuses Bush of "fiscally irresponsible economics" for proposing big tax cuts.

Even though Congressional Democrats and the Clinton administration favor prescription drug benefits for all Medicare recipients and expanded health and education programs, at the moment they are saying they, too, want to reserve the bigger surplus to "protect" Social Security and Medicare and pay down the national debt.

Meantime, Congressional Republicans say they plan to break up last year's $800 billion tax cut into its component (and popular) parts- - reducing the so-called "marriage penalty," capital gains and inheritance taxes - in hopes of attracting Democratic votes and overriding Clinton vetoes.

Polls show that paying down debt is the most popular use of the surplus, but that requires politicians to restrain all their natural impulses. Don't bet your last $1 trillion on it.

JWR contributor Morton Kondracke is executive editor of Roll Call, the newspaper of Capitol Hill. Send your comments to him by clicking here.


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