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07/11/2001

US Budget Surplus Estimate Lowered

by ALAN FRAM

Associated Press Writer

WASHINGTON (AP) -- White House budget chief Mitchell Daniels estimated Wednesday that this year's federal surplus will be at least $160 billion, a figure he called ''terrific'' even though it was the Bush administration's lowest forecast yet.

The number had significance for political reasons as well. If accurate, it would mean much of the $28 billion portion of this year's projected surplus coming from Medicare would be eroded -- which Democrats and some Republicans consider politically treacherous because of the health-insurance program's popularity.

Daniels also defended the recently enacted $1.35 trillion, 10-year tax cut as ''the single best thing the economy has going for it'' because it will flush money into peoples' wallets, encouraging spending and saving.

The budget director's remarks came as he and top Senate Republicans launched a counteroffensive in the partisan dispute over why federal surplus projections, while still large, have begun to drop. Daniels will testify Thursday on the subject before the Democratic-controlled Senate Budget Committee.

''The surplus is in terrific shape,'' Daniels told reporters at a briefing, adding later, ''It's the economy that's not in the best of shape.''

Democrats have blamed the drooping economy and a tax cut they consider too large for the government's vanishing black ink. They have predicted that as a result, the portion of this year's surplus that comes from Medicare will be eroded -- which, if true, would not effect the program's operations but would be politically risky.

Administration officials reject the notion that Medicare contributes to the surplus, arguing that overall the program is in the red.

In May, the nonpartisan Congressional Budget Office projected a $275 billion surplus for fiscal 2001, which runs through Sept. 30. But last month, after factoring in the price tag of the tax cut, their figure fell to $200 billion.

Two weeks ago, Lawrence Lindsey, economic adviser to President Bush, said the $200 billion estimate might prove accurate. But on Wednesday, saying the government was collecting 2 to 3 percent less in revenue than it forecast in the spring, Daniels said this year's surplus would be $160 billion or more.

''That's a very positive thing,'' he said. ''The American public should understand the strong position we're in.''

Indeed, a $160 billion surplus would be the second largest ever, behind only the record $237 billion surplus the government rang up in 2000.

Daniels said the administration's 10-year budget forecast would also come down, ''but not dramatically.'' It's last projection was for $5.6 trillion in surpluses from 2002 through 2011, but that was before the tax cut became law.

Daniels said the administration would still make sure that Social Security surpluses are not drained, and said there are no risks ''at present'' that its money would be tapped into. The surpluses from that program, which is also enormously popular, are expected to make up about three-fourth's of this year's overall surplus.

Earlier, two top Senate Republicans contested claims by Senate Budget Committee Chairman Kent Conrad, D-N.D., that the tax cuts would threaten Medicare, saying the program would remain strong.

Sen. Charles Grassley of Iowa, top Republican on the Senate Finance Committee, said Democratic criticism has evolved into ''blatant demagoguery'' and said the real challenge to the surplus was controlling ''excessive spending.''

And amid suggestions by some Democrats that parts of the tax cut should be erased, Sen. Pete Domenici, R-N.M., said, ''If you really want to drive this country into the economic ditch, raise taxes during a slowdown.''

Meanwhile, a $32.7 billion measure financing the Treasury Department and other agencies next year was approved by a subcommittee of the House Appropriations Committee. As with many spending bills Congress has begun to write, it would exceed the amount Bush requested, in this case by $300 million.

The bill would end the insurance coverage federal employees now receive for contraceptives, and open the door for a pay raise for members of Congress next year.

AP-NY-07-11-01 1959EDT< 

-- (M@rket.trends), July 12, 2001

Answers

My favorite quote from the article:

"Daniels said the administration's 10-year budget forecast would also come down, ''but not dramatically.'' It's last projection was for $5.6 trillion in surpluses from 2002 through 2011, but that was before the tax cut became law."

In other words, either the Bush administration doesn't actually know what effect their own tax cut will have on the "surplus", or else they don't want to say in public. Which of these two alternatives gives you a warm, fuzzy feeling?

-- Little Nipper (canis@minor.net), July 12, 2001.

>>In other words, either the Bush administration doesn't actually know what effect their own tax cut will have on the "surplus", or else they don't want to say in public. Which of these two alternatives gives you a warm, fuzzy feeling?

The media is wringing its hands because the surplus may be dwindling because of a tax cut. Even worst, the repubs are backpedaling, saying that further cuts were being put on hold because of the dwindling 'surplus.'

Let me ask the people of all parties: Why is even $1 of surplus good? Doesn't this mean you took too much money from too many bipeds?

-- NonProfitGovsPlease (What.Am@I.Missing), July 12, 2001.

NonProfit,
It might be ideal if government spent approximately what it took in, neither appreciably more nor less, but judging from the national debt, this has not been happening. A projected budget surplus (charitably assuming it to be an honest surplus and not a bookkeeping deception) wouldn't be a bad thing if it's applied to reducing the national debt. Whether the political will exists to make this happen is debatable.

-- David L (bumpkin@dnet.net), July 12, 2001.