Guess what's missing in Washington? (A surplus)

Wave goodbye to the budget surplus.

In January, the Congressional Budget Office projected a $313 billion federal surplus in fiscal 2002, starting today.

"It's all gone," says Richard Kogan, a budget expert at the Center for Budget and Policy Priorities, a Washington think tank.

A combination of the Bush tax cut, a slow economy, the counterterrorism effort and reconstruction plan, and now fiscal measures to stimulate the economy, is wiping out the entire surplus, including that of the Social Security system.

Departure of the surplus may cause some tears. But that's not the case for most liberal economists. They prefer fiscal stimulus over a budget surplus.

"We are in a recession," says Robert Scott, an economist with the Economic Policy Institute in Washington. "We need to help the workers and families of workers who lose their jobs."

There's widespread agreement in Washington on the need to give the economy a jump-start. The big question: how?

But first, back to the surplus.

In fiscal 2001, just concluded, the total surplus will run $121 billion, the CBO reckons. That's down sharply from the $153 billion estimated by the CBO in August. Revenues are falling with a weak economy.

The CBO's number also indicates that Uncle Sam has broken into the "lockbox" on Social Security revenues, using some $50 billion to cover non-Social Security spending.

As for fiscal 2002, another reason the projected $313 billion surplus will vanish so fast, is that it was never really that big. The Bush administration budget was full of gimmicks that in effect exaggerated the surplus so that the president could more freely argue for a $1.6 trillion tax cut over 10 years.

There could be a small surplus in 2003, says Mr. Kogan.

After that, there is "$2 trillion of uncertainty" as to the amount of surplus in the years through fiscal 2011, Kogan figures. It hangs on how fast the economic recovery comes, whether Congress passes a temporary or permanent stimulus package, and costs and events in the war against terrorism.

What seems fairly certain is that the nation's outstanding federal debt will not completely disappear in this decade.

The debt held by the public could actually increase, speculates Stan Collender, a budget expert at Fleishman-Hillard, a Washington consulting firm.

Another byproduct of the slump and budget scene is that federal spending as a proportion of gross domestic product, the nation's output of goods and services, is likely to rise.

It could rise from 18 percent in 2001 to a still modest (by comparison with other industrial nations) 19 percent this year, guesses Kogan.

By that comparative measure, the size of the federal government is growing slightly. But it remains well under the 23 percent level in the deep recession of 1983 during the Reagan administration.

And the rate of growth in federal expenditures in fiscal 2000 and 2001 has been below the historical average. Congress has not been on a spending binge.

Looking at federal revenues - the other side of the coin, government is shrinking. Revenues stand at about 21 percent of GDP, and may fall to 19 percent.

That would mean balance in the budget - no surplus.

These trends result partly from what economists call "automatic stabilizers."

Government spending on unemployment compensation, food stamps, Medicaid, and some other welfare-type measures rises automatically when the economy slows and unemployment rises. These measures help support personal incomes, and thus spending.

These stabilizers have helped moderate the severe booms and busts that rocked the United States in the 19th century and early 20th century before the Great Depression prompted President Roosevelt's New Deal.

Since then, economic expansions have been longer and recessions shorter and less traumatic.

Kogan would like to see the automatic stabilizers strengthened. For instance, unemployment compensation now covers only 40 percent of those laid off. It could be broadened to include more workers and extended beyond 26 weeks when unemployment is high in a region of the nation.

He also wants any stimulus measures to be temporary. This would raise the odds that a budget surplus will return and help keep long-term interest rates low.

Mr. Scott and a colleague, Christian Welder, propose a $137 billion-plus package of "emergency relief and economic stimulus" that includes tax rebates for low-income families, public school building, Amtrak modernization, airport security measures, and so on.

In Congress, legislators are being pushed by business for tax breaks, such as a drop in the corporate income tax and capital-gains tax rates.

Kogan, Scott, and other liberals say such measures won't work well or quickly. They urge direct aid to workers and their families hit by the recession.

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