1. Archive

Budget surplus is best left alone

The 20th century gave us activist government, which should (we came to believe) constantly lead us into projects of national self-improvement. The sense of urgency is now in full flower. President Clinton last week delivered a predictably rousing State of the Union, advancing a multitude of proposals for collective betterment (from a drug benefit under Medicare to many tax breaks for the middle class). The Congressional Budget Office projects huge budget surpluses, totaling perhaps $3-trillion over the next decade. The stage seems set for vast deeds of public good. Spare us.

We are at one of those times when doing nothing is preferable to doing something. This applies especially to budget surpluses. We now have a largely lame-duck government. Clinton is obsessed with his legacy. Almost everyone in Washington is more focused on short-term politics _ who gains control of Congress and the White House _ than on the long-term national interest. In this climate, the president and Congress could easily squander sizable segments of the surpluses on vote-getting programs. We should pray for gridlock.

The best use of the surpluses now is to pay down the publicly held federal debt. This is mostly common sense. Over the next 15 years the federal government faces two potentially huge spending increases _ one certain, the other possible. The certainty is the explosion in retirement spending (mainly, Social Security and Medicare) for the aging baby boom generation. The possibility is a need for higher defense spending. At 3 percent of gross domestic product, it is now lower than any time since World War II. Military morale and readiness have already declined, even in an unthreatening world. What happens if threats rise?

Paying down the debt would make it easier to meet these spending pressures without reverting to budget deficits or big tax increases. By the budget office's projections, the surpluses could repay most of the debt (now $3.6-trillion) over the next decade. This would reduce the cost of interest payments, which have already dropped from 15.3 percent of federal spending in 1995 to 13.5 percent in 1999. Clinton argues that, even with his expansive proposals for tax breaks and spending programs, the debt can be virtually repaid by 2013. Texas Gov. George W. Bush asserts that his larger tax cut could also repay the debt by the same year.

We should treat these claims skeptically. Any long-term projection is inevitably inexact. Since last summer, the CBO has raised its 10-year estimate of the budget surpluses by roughly $1-trillion. This is not, as Dave Barry might say, a joke. Small shifts in assumptions about economic growth or tax revenues dramatically affect budget surpluses or deficits. Since the summer, the CBO has grown slightly more optimistic. Commendably, the CBO also presented a more pessimistic forecast based on lower economic growth and higher health costs. The gloomier forecast transforms a $3.2-trillion surplus between 2001 and 2010 into a $1.1-trillion deficit.

Prudence dictates that we shouldn't spend hypothetical money. So, interestingly, does politics _ in both the good and bad senses.

We're about to have an election. On the surpluses, the parties do differ. Democrats generally favor more spending on everything from health insurance for the uninsured to school aid. Republicans generally favor larger tax cuts. Perhaps voters will signal their own preferences.

The point is that, after 28 straight years of budget deficits (until 1997), dealing with surpluses is something new. The current president and Congress shouldn't pre-empt the issue before voters have an opportunity to express themselves.

The impulse to pre-empt would almost certainly favor proposals intended to impress selected blocs of voters, with little thought to lasting consequences. The president praises personal "responsibility," but his idea of good government is to make people more dependent on governmental favors _ tax breaks, spending subsidies and regulations _ in the hope of inspiring political gratitude. Governmental activism has blurred the distinction between addressing true national needs and catering to personal convenience.

Our leaders are expected to be always aiding someone. There are two illusions here: that government is the source of all social progress and that activism is the source of good government. In the current situation, we'd benefit most if the current crowd of lame ducks acted like lame ducks. They should quack a bit, flap their wings and then waddle away. Less may well be better. We should only be so lucky _ and probably won't.

Robert J. Samuelson is a columnist for Newsweek.

Washington Post Writers Group