The debate surrounding the anticipated budget surplus.
February 19, 1998
in this forum:
Is the Clinton administration using smoke and mirrors to create this so called surplus? If there is a budget surplus, wouldn't it be beneficial to pay down the national debt? What are the key assumptions in the projection of a Federal budget surplus? If a surplus does exist, wouldn't it make sense to give it back to the American people in the form of a tax cut ? Wouldn't it make sense to use this surplus to bolster the long-term solvency of the Social Security system?
February 2, 1998
Budget Director Franklin Raines and Senator Pete Domenici (R-NM) discuss the possible budget surplus.
January 9, 1998
Exploring the possiblities and plausibility of a budget surplus.
August 5, 1997
President Clinton signs a budget deal that will balance the books by 2002.
Experts analyze the budget deal.
Sen. Pete Domenici and Budget Director Franklin Raines discuss the budget agreement .
Browse the NewsHour's coverage of the budget, the White House and the Political Wrap index
Office of Management and Budget
U.S. Senate and House of Representatives
The Urban Institute
Citizens for a Sound Economy
Matthew Emerson of San Gabriel, CA, asks: If there is a budget surplus, wouldn't it be beneficial to pay down the national debt?
Mr. James Miller, counselor at the Citizens for Sound Economy, responds:
Paying down the debt is a worthy goal. I would do it over a generation, much like paying off a conventional (home) mortgage. That is, for the first few years, most of the payment would be for interest, with payments in the later years consisting mostly of payments on principal.
That said, let me state my preference for tax cuts instead of paying off the debt right now. One reason is that tax cuts would do more to stimulate economic activity than reducing the debt. But reducing the debt would be better than simply spending the money. The problem is that current proposals to pay off the debt would end up financing new spending rather than reducing the debt.
Dr. Rudolph Penner, the Arjay and Frances Miller Chair in Public Policy at the Urban Institute, responds:
I agree that it would be beneficial to use the surplus for a few years to pay down the debt. I say that only because we face a huge burden in future years when the baby boomers retire and the costs of social security, Medicare, and Medicaid soar. If we pay down some of the debt, our interest costs will be lower when this happens and the reforms in programs for the elderly can be somewhat less painful and therefore, easier politically. In addition, the reduction in the debt will release savings that can be used by the private sector for productivity enhancing investments and the economic growth rate will be higher.
If the baby boomer problem did not exist, I would be enthusiastic about using the surplus for tax cuts and for some judicious spending increases.