have laid out plans – or at least plans of plans – that point to decreasing
surpluses through a combination of tax cuts and spending increases. The
exact mixture of the tax cuts and spending differs between the two candidates,
with Bush favoring a greater dose of the tax cuts.
Budget Office (CBO) has recently estimated the surplus to be in the range
of $4.5 to $5.7 trillion over the next 10 years. However, these numbers
are based on little or no increases in discretionary spending. If the current
congress (or future congresses) increase discretionary spending at a rate
greater than the rate of inflation, the projected surplus will be less
than the $4.5 trillion. Some estimates put the projected surplus at 1/10th
of that value.
plan will do the least damage to the deficit?
|Total Surplus:||4.56 trillion||4.56 trillion|
|Social Security:||2.38 trillion||2.38 trillion|
|Remaining||2.17 trillion||2.17 trillion|
|1.31 trillion||480 billion|
|279 billion||705 billion|
|312 billion||253 billion|
|Subtotal||1.90 trillion||1.44 trillion|
|Reserve||267 billion||737 billion|
Concord Coalition Issue
It looks like
proposals will shrink the surplus the least. The Concord Coalition (a nonpartisan
organization with deficit elimination as its primary issue) has a nice
chart showing how each candidate uses the surplus – they use each campaigns
own numbers when doing the calculations. Starting with a $4.56 trillion
estimate for the surplus, Gore leaves $737 billion, and Bush Leaves $267
Of course if the
original estimate of the surplus is too high, then these reserves may very
well become deficits.
big is the surplus?
organizations have tried looking at different assumptions about policy
to try to find the real amount of money available in the surplus for the
candidates to “play with”. Of course, if the projections are wrong, the
candidates must either alter their policy proposals or run deficits.
Budget and Economics Outlook: An update, CBO
The is the official
government source for the “baseline” estimates of the surplus. Under the
assumption that discretionary spending grows at the rate of inflation after
2000, the total surplus over the next 10 years is estimated to be $4.5
trillion. For a nice overview of the issues involved in the CBO projections
see FRBSF Economic Letter, #99-27.
Surplus Field of Dreams, Concord Coalition
October 11, 2000
a ticket, The Concord Coalition recommends that voters take a hard look
at the possibility that the field of dreams may never materialize, and
the extent to which either of the candidate’s budget blueprints could land
us back in the red.”
and Gale, Brookings
The authors point
out that the projected surplus is based on one set of assumptions about
the path of policy. “More plausible notions of current policy reduce the
available 10-year surplus to $350 billion.”
and Greenstein, Center on Budget and Policy Priorities
“As a result
[of alternative policy assumptions], the amount actually available for
tax cut and program initiatives (other than Social Security and Medicare
solvency measures) may be in the vicinity of $400 billion over 10 years
rather than $1.9 trillion.”
Tax Bills: Keynes on his Head
suggests that in order to stabilize the economy we should raise taxes and/or
lower spending in booms, and do the opposite in recessions. The Congress
and the President seem to be heading in the opposite direction.
Assumptions and the Balanced Budget Agreement
A Balanced Budget
by 2002? What role do long-run projections of the health of the economy
play? This was the very first article I wrote for About (then known as
“The Mining Company”).