Buddy, can you spare $200 billion? The US can!

Congress has a problem that we'd all like to have: too much money.

Federal revenues are piling up so fast it could discombobulate the political scene.

The growing surplus makes George W. Bush's plan for a $300 billion tax cut over five years more possible without harming Social Security.

That's awkward for the Democrats. They have tried to block Republican tax-cut plans on the basis of the slogan, "Save Social Security first."

For Republicans, the danger is that the bubbling surplus adds to the air of economic prosperity that benefits Al Gore.

Here's what has happened: In early February, President Clinton's budget put the surplus at $167 billion in fiscal 2000. Then, on March 10, the Congressional Budget Office (CBO) predicted a $179 billion surplus. Now Fred Ross, a consultant to the Schwab Washington Research Group with a superb record of forecasting budget deficits and surpluses in recent years, reckons $200 billion to $225 billion - quite a jump from last fiscal year's $124 billion surplus.

Looking at actual income and outlays for six months through February, Mr. Ross predicts revenues will grow 9 percent for the full fiscal year and expenditures 3 to 3.5 percent. So the surplus soars.

"This makes an argument that a tax cut is affordable," notes Greg Valiere, a colleague in Washington of Ross.

Congressional Republicans have been annoyed at the CBO in recent years for its pessimistic budget projections. More cheery, accurate estimates of budget surpluses might have given a boost to their various tax-cut proposals.

Indeed, an extra $50 billion surplus a year now might even allow Democrats a little extra spending as well - if it won enough Republican support.

If Congress doesn't use up much of the surplus, all outstanding federal debt will disappear even faster than 2013, the year predicted in the Clinton budget.

Federal Reserve Chairman Alan Greenspan has urged Congress to let the surpluses go toward reduction of the $3.6 trillion in debt owed to the public.

This rapid disappearance of Treasury debt has important implications for the nation's financial markets. Treasury bonds, notes, and bills are the benchmark debt instruments against which trillions in private debts are compared. Anything less secure than US Treasuries, here or abroad, must pay a higher interest rate.

Treasury Secretary Lawrence Summers suspects if all treasuries were paid off, other semi-guaranteed government debts - for instance, Fannie Mae debts - might substitute as a benchmark.

The rapid pay-down of federal debt has also created a problem for monetary policymakers, notes Mr. Valiere. A declining supply of long-term Treasuries has kept their price up and yield low. That means long-term interest rates remain relatively low at a time when the Fed is trying to slow the economy.

Concern about disappearing Treasuries, though, is to a degree counting chickens before they hatch.

For one thing, a large slowdown in the economy or a recession would quickly deplete the budget surplus. So might a stock market crash - some analysts suspect the swelling surpluses stem to a considerable degree from cashed-in corporate stock options and other stock-market profits.

Congressional action could also shrink the budget surplus quickly.

The budget resolution passed by the Republican-controlled House March 24, provides for $150 billion to $200 billion in tax cuts. That sum, economist James Horney calculates, would eat up at least 98 percent and possibly more than 100 percent of the non-Social Security surpluses projected for the next five years.

Right now, revenues from Social Security payroll taxes exceed the benefits paid. That surplus counts as part of the overall budget surplus. And both Republicans and Democrats pledge not to touch it.

If the non-Social Security surplus over the next five years turns out to be bigger than the $171 billion projected by the CBO, then Congress has more room to play. Ross's forecast of a large surplus implies that room is there.

To Mr. Horney, an analyst with the Center on Budget and Policy Priorities in Washington, congressional fiscal discipline is already eroded.

The House now projects its spending and revenue numbers only five years ahead, not the 10 years of last year's budget resolution.

So costs of any proposed tax cuts or new entitlement spending could "explode" in the second five years. This would "exacerbate the long-term imbalance between revenues and expenditures the nation will face when the baby-boom generation retires in large numbers," Horney argues.

Another danger is that the resolution sees nondefense discretionary spending declining after inflation in the next five years. That's not likely, says Horney. Congress isn't that disciplined in its spending.

(c) Copyright 2000. The Christian Science Publishing Society

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