Projected surplus not for spending, experts say

As congressional leaders look to the sizable budget surpluses the Congressional Budget Office is projecting to pay for tax cuts, entitlement reform and additional spending, budget experts off Capitol Hill and conservative Democrats are cautioning against banking on those surpluses in making budget policy.

Last week, the CBO released updated budget numbers projecting a non-Social Security, or on-budget, surplus of $14 billion for fiscal year 2000 and a 10-year, on-budget surplus of $996 billion. With congressional leaders pledging not to use Social Security revenues to pay for tax cuts or discretionary spending above the budget caps, any major fiscal initiative must be paid for with the on-budget surplus.

Budget policy experts across the political spectrum question the CBO's 10-year spending projections, while the revenue numbers have come under fire from the right. The Center on Budget and Policy Priorities said last Thursday that "the substantial majority of the surplus projected outside Social Security is essentially artificial because it depends on unrealistic assumptions that large, unspecified cuts will be made in discretionary programs over the next 10 years."

The center estimates that 73 percent of the CBO's projected on-budget surplus-or $730 billion of the estimated $996 billion over 10 years-would not materialize if spending exceeds the stringent budget caps in place through 2002.

At the libertarian Cato Institute, Director of Fiscal Policy Studies Stephen Moore criticized the CBO's revenue and economic growth numbers as far too conservative. "They are way, way off on the revenues. They ought to err on side of caution, sure, but they should be accurate." Moore also thinks Congress will break the caps, throwing the CBO's annual spending projections "off by about $25 billion" over the decade. Budget analyst Stan Collender said: "The bottom line is actually pretty simple. These [CBO estimates] are based on a variety of assumptions that are understandable, but not true."

Looking beyond the 10-year window, conservative Democrats in the Blue Dog Coalition and the CBO itself note the unfavorable demographic trends that could undo any surplus.

The CBO's July 1 report warns that: "After 2010, the retirement of the Baby Boom generation will pick up steam, bringing with it a greater demand for Social Security, Medicare and Medicaid benefits. Budgetary pressures caused by increased participation in such programs can easily reverse the favorable fiscal forces that are operating today." Blue Dog Democrats voiced similar concerns in a July 1 letter to Speaker Denny Hastert, R-Ill., stating that Congress "should not forget that the general budget will face tremendous pressures to fund the shortfall in the Social Security trust fund that will begin in 2014." The Blue Dog budget calls for reserving half the anticipated on-budget surplus for debt reduction, one quarter for targeted tax cuts and the remaining quarter for priority programs such as defense, veterans, education and agriculture.