Look for a growing budget surplus

The press has had some fun recently pointing to the scramble by members of Congress to dig into the federal pork barrel to finance various projects in their districts.

"Scandalous," stated one Washington report of the effort by the members to boost their electoral prospects at home.

Well, maybe. Certainly "hypocritical" would be an appropriate word. Most members talk of restraining federal spending.

Sen. John McCain (R) of Arizona has on his Web site a huge pig pushing along a barrel of money with his snout. So far, according to the senator, Congress has spent $21 billion on pork-barreling - that is, "low priority, unnecessary, or wasteful spending."

Fortunately, most of today's pork projects aren't as greasy as they might have been two decades ago. "They are not as bad as the good old days," says Fred Ross, a veteran budget watcher. "We are not talking $1 billion here, $1 billion there." Many have some value, but didn't go through a "merit-based appropriation process," as Mr. McCain puts it.

Mr. Ross, a consultant with the Schwab Washington Research Group, reckons that the really silly projects add up to only a few billion. Most of the individual projects cost a few million or less.

His point is not that pork barreling is a good thing, but that despite the extra spending of Congress in this election year, the budget surplus is going to grow, not diminish, for at least the next couple of years.

Earlier this month, President Clinton said the surplus for the fiscal year that ended Sept. 30 would be about $232 billion. The official number came in at $237 billion.

Ross says the surplus was actually more like $245 billion. The government, for whatever reason, engaged in a little "creative accounting" to shrink the surplus, he says.

For one thing, excise-tax revenues, mostly gasoline taxes, were down $4 billion from the year before. That doesn't make sense, Ross figures, unless drivers had permanently parked their SUVs or found tax-free gas.

Second, the government paid the military a few days early, on Sept. 29, thereby pushing $4 billion of outlays into fiscal 2000.

In any case, Ross now figures that the surplus will grow to about $315 billion this fiscal year and $350 billion in fiscal 2002 - substantially more than the Congressional Budget Office (CBO) projects for those years.

Those surpluses, Ross says, are already "pretty much in the bag."

That's because of the time it will take a new president to implement his programs.

Whoever wins will only take office in the new year. He will make proposals to Congress for new tax cuts and spending. Congress, perhaps divided between the two main parties, likely won't act on the measures until summer or fall. So, many measures will not start becoming effective until 2002. And usually Congress "back loads" its tax cuts and new spending proposals so the costs fall most heavily well into the future - beyond fiscal 2002.

Including budget surpluses that began in 1998, Uncle Sam will have paid off $1 trillion in debts two years from now. Amazing!

This reflects the fact that Washington's magic revenue machine is working nicely.

Revenues were up 11 percent in fiscal 2000. Ross counts on 8 percent for each of the next two fiscal years. He doesn't dare predict beyond that. Who knows whether a recession will come along and slow revenues. Or maybe a stock market bust will eat into husky capital-gains tax revenues.

On the spending side, Ross talks of a 6 percent annual growth rate ahead - twice the inflation rate. "Troubling," he says.

James Horney, an economist at the Center on Budget and Policy Priorities in Washington, reckons Congress has already used up by legislation $850 billion of the $2.2 trillion in non-Social Security surpluses projected by the CBO for the next 10 years. That leaves less money for tax cuts or spending.

But if Ross is right, the surplus will at least start out bigger than that CBO figure.

In any case, if by some miracle the budget proposals of either Vice President Al Gore or Texas Gov. George W. Bush are put fully into law, federal outlays as a percentage of the national economy will still shrink.

Government actually will be smaller.

David R. Francis is the senior economics correspondent of the Monitor.

(c) Copyright 2000. The Christian Science Publishing Society

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