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SURPLUS FEVER
The debate surrounding the anticipated budget surplus. February 19, 1998 |
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Questions asked
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?
NewsHour Backgrounders
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.
July 29,1997
Experts analyze the budget deal.
May 2,1997
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
OUTSIDE LINKS:
Office of Management and Budget
U.S. Senate and House of Representatives
The Urban Institute
Citizens for a Sound Economy
WHERE DOES THE MONEY GO? According to the budget proposal, the government will spend $1.73 trillion in fiscal 1999:
25 percent ($425 billion) will go to Social Security;
30 percent of it will be spent on Medicare, Medicaid and other federal entitlement programs;
16 percent will go to "discretionary" programs, including education, housing, technology and transportation;
15 percent ($267 million) of the budget will constitute national defense;
14 percent ($240 million) will go to making interest payments on the national debt.
A t a White House ceremony on February 2, 1998, President Clinton unveiled a budget plan that he expects will generate the first surplus in nearly 30 years.
Barring any significant economic downturn, the Clinton Administration expects the federal budget to yield a $9.5 billion surplus in fiscal 1999 and nearly $1 trillion in surpluses over the next decade. In Washington, the anticipated budget windfall has generated a "surplus fever" among politicians and economists. Debate has shifted from how to cut the deficit, to how to spend the surplus.
In his State of the Union address, President Clinton urged Congress to reserve the budget surplus until the Social Security system has been strengthened for the next century. With the approaching retirement of the baby boomers, the president has said that now is the time to ensure the financial security of the system that supports America's retirees.
Although members of both parties agree that portions of the surplus should be spent on shoring up the Social Security system, they disagree over other ways a surplus might be used.
Many Republicans say that the budget surplus presents an opportunity to initiate a wave of tax cuts. These cuts, they contend, will foster further economic growth by promoting future investment.
Still others, including Federal Chairman Alan Greenspan, favor a different tact. If a surplus should exist, Mr. Greenspan argues it should be used to help reduce the $5.6 trillion national debt. Such a measure would help bring down long-term interest rates and help spur savings and investment.
Some lawmakers and economists have said they don't think the books will be balanced at all, much less achieve a possible surplus. In an op-ed piece in the Washington Post, Senator Ernest Hollings (D - SC), referred to the president's accounting techniques as "gimmick." In fact, he argued, the government is still spending more money than it is receiving.
What do you think? Is the budget surplus an illusion? If it does exist, should the surplus be used for tax cuts? What are the economic benefits of using the surplus toward paying off the national debt? Is it premature to discuss spending a surplus that is only projected?
Answering your questions are Dr. Rudolph Penner and Mr. James Miller III.
Dr. Penner is a former Director of the United States Congressional Budget Office and currently holds the Arjay and Frances Miller Chair in Public Policy at the Urban Institute.
Mr. Miller is a former Director of the Office of Management and Budget under President Reagan. He also was Chairman of the Federal Trade Commission and an associate director of the OMB. He is currently a counselor at the Citizens for Sound Economy.
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?
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