Now here's a new problem for Congress and the president: What should be done with a federal budget surplus?
We've been so accustomed to red ink flowing in Washington that this may take a little extra head scratching. But the budget deficit for fiscal 1997 that ended Sept. 30 fell to $22.6 billion, the lowest in 23 years. The forecast last February was for $126 billion.
Many analysts see even better news in the current fiscal year. "Probably a surplus," says Peter Kretzmer, an economist at NationsBank Montgomery Securities Inc., New York.
Several years back, whenever the White House presented a new budget, it could expect charges that it assumed a "rosy scenario" for the economy.
Well, Rosy has arrived. The economic expansion is husky. The stock market has been so exuberant that Fed chairman Alan Greenspan has asked if it is also "irrational."
These two factors pumped up federal revenues faster than the Clinton administration calculated last February. Investors reaped handsome capital gains and paid taxes on these.
Congress spotted that revenue upturn quickly. In working out a budget deal this summer promising a surplus by 2002, it spent the extra money by making fewer budget cuts and trimming taxes a bit more.
But we're not convinced that is the way to go when budget deliberations get under way next year. There should be an effort to reduce the federal debt. That now amounts to a huge $5.4 trillion, of which $1.5 trillion is held by federal agencies and $1.2 trillion by non-Americans.
The interest on that debt amounts to $245 billion, about 15 percent of federal outlays. Over time, that percentage would shrink with a balanced budget. A budget in surplus would trim debt service costs faster. Only after such a debt reduction should Congress return to considering further tax cuts or substantial additions to spending.
We hope the Republican majority in Congress and Democrats following President Clinton can restrain themselves on both tax cuts and new spending programs until debt service costs are substantially reduced. That is only prudent in the face of uncertain future costs connected with global warming and the impact of baby boom retirements.
If and when tax cuts become feasible, Republicans in Congress would be wise to see that the bottom half of the income ladder is rewarded. It does not help the GOP's plans to achieve majority party status in America if the party is viewed as helping only its most prosperous friends and donors.
In the final analysis, to be successful the free-enterprise system must be seen to be helping all citizens who participate in its prosperity-building process.