CLT Update
Friday, August 24, 2001

"Tax cut blamed for lower surplus"

"Tax cut blamed for lower surplus," the New York Times News Service headlined yesterday [from Worcester Telegram & Gazette report, below]. Now there's a dog-bites-man story if ever there was one.

Talk about stating the obvious: Returning a tax overpayment will always lower a surplus of taxpayers' money held by the government, near as I can tell!

But the Bush tax cut is not the only cause - or even the primary cause. The real culprit is -- what's new? -- government spending.

The National Taxpayers Union reported on Wednesday: "The blame for lower budget windfalls rests squarely on the shoulders of big-spenders, not tax cutters. The idea that tax reductions are somehow responsible for revised budget projections, while spending has been rising and continues to soar, is the height of fiscal folly." [NTU news release below]

Does all this "the-sky-is-falling" caterwauling by Congressional Democrats remind you a little of our Legislature?

Here in Taxachusetts they more than doubled the state budget (to $23 billion) in a dozen years and still don't have enough. Now they're plotting to raise the ceiling on the "rainy day" stabilization fund so they can keep last year's $500 million surplus from rolling over into the Tax Reduction Fund and being returned to those who earned it, us taxpayers.

More Is Never Enough -- and never will be.

Chip Ford

National Taxpayers Union
108 North Alfred St.
Alexandria, Virginia 22314

For Immediate Release
Wednesday, August 22, 2001

For Further Information, Contact:
Eric Schlecht, Jerry Terry, or Pete Sepp (703) 683-5700

Bloated Spending to Blame for Sapping Budget Surpluses,
Study Shows

(Alexandria, VA) - As Congressional critics pointed to the recently-passed tax cut for shrinking federal surplus projections released today by the Office of Management and Budget, research from the non-partisan National Taxpayers Union (NTU) has identified the true culprit -- a relentless onslaught of spending programs aided and abetted by lawmakers themselves.

"The blame for lower budget windfalls rests squarely on the shoulders of big-spenders, not tax cutters," said NTU Director of Congressional Relations Eric V. Schlecht. "The idea that tax reductions are somehow responsible for revised budget projections, while spending has been rising and continues to soar, is the height of fiscal folly." Among Schlecht's findings:

  • Total federal outlays in 1995 were $1.51 trillion. In 2001 they are scheduled to be $1.86 trillion. That is an increase of 22%. Average inflation during that period was 2.5% per year.

  • On its way out of town last fall, Congress voted to bust the budget caps by a whopping $52 billion over the previous year's caps and $26 billion over the inflation adjustment.

  • The spending spree is scheduled to continue. Between 2001 and 2006 total federal outlays are scheduled to increase by 20%, from $1.8 trillion to $2.2 trillion.

  • If all the bills introduced by the Senate and the House of Representatives during the last Congress had passed, they would have increased spending by $973 billion a year. In other words, the Bush tax cut will save taxpayers $511 billion between 2002 and 2006, while the 106th Congress proposed to spend $4.9 trillion over the same period -- thereby reducing the surplus by nearly 10 times that amount.

  • Meanwhile, Congress is currently considering an education bill that would sap the surplus by at least $120 billion over the next 5 years, and is poised to take up a prescription drug benefit entitlement that could take a bite of $632.5 billion over the next 5 years.

  • Nondefense discretionary spending was $147 billion in 1986. If this spending had been held to the rate of inflation over the past 15 years, its level in 2001 would $228.8 billion instead of $325.7 billion (i.e., the surplus would be $96.8 billion larger).

  • If nondefense discretionary spending growth had been held to 2.5% per year during the Clinton era, the "on-budget" (non-Social Security) surplus would be $51.1 billion larger in 2001.

"Unlike our free-spending Congress, the typical family knows how to tighten its belt when the situation demands it," Schlecht concluded. "Instead of depriving American families of their hard-earned tax cut, lawmakers should learn to do the same with Washington's waistline. The last thing our sagging economy needs is for government to gobble up more of our money by raising taxes."


NTU is a non-profit, nonpartisan organization with 335,000 members working for lower taxes, less wasteful spending, and accountable government at all levels. Note: These and other findings will appear in a detailed study of Washington's fiscal track record on managing budget surpluses, scheduled for full release early next week. For details, call (703) 683-5700 or visit

The Telegram & Gazette
Worcester, Mass.
Thursday, August 23, 2001

Tax cut blamed for lower surplus
New York Times News Service

WASHINGTON - Ending a brief but giddy era of fiscal plenty, the Bush administration released figures yesterday showing that the projected federal budget surpluses outside of the Social Security system had dwindled to almost nothing for the next several years.

For the current fiscal year, the administration estimated, the government would run a surplus outside of Social Security of about $600 million, an almost negligible amount in a $1.9 trillion budget and a $10 trillion economy. As recently as April, the White House projected a surplus of $122 billion in the non-Social Security system for the fiscal year, which ends on Sept. 30.

Largely because of the tax cut passed by Congress this year and the slowdown of the economy, the surpluses outside of Social Security will remain small for the next three or four years before beginning to grow again, the White House said.

The government will continue to run substantial Social Security surpluses, the administration said, including $157 billion this year. But by agreement of the two parties, that money is off limits for spending or tax cuts and is reserved for reducing the national debt or shoring up the retirement system.

The sharp turnabout -- just months after the Republicans and the Democrats were busily making plans for allocating what seemed to be an endless windfall from the prosperity of the late 1990s -- sets up a return to bitter budget battles and efforts by each party to turn the situation to its political advantage.

White House officials sought to cast the news in the best possible light. They said the country was still in sound financial condition and that an anticipated rebound in the economy should provide enough money over the next decade to deal with all the nation's priorities, especially if the tighter budget encourages Congress to pare wasteful or inefficient spending.

Despite the sharp slowdown in the economy, the surplus for this year, including Social Security, will still be the second largest on record, "a phenomenon that should strike all Americans as very positive," said Mitchell E. Daniels Jr., the White House budget director. The total surplus last year was $236.9 billion, a record.

Democrats responded that the administration had squandered the surplus by pushing through an irresponsibly large tax cut, putting the government into such a squeeze that not only Democratic initiatives but Bush's own agenda, including a big increase in military spending, would be impossible to carry out.

"I believe President Bush's campaign promises are unraveling," said Sen. Kent Conrad, D-N.D., the chairman of the Senate Budget Committee. "He claimed we could afford his massive tax cut, a major defense buildup, more money for education, while paying down the debt and protecting Social Security and Medicare. He was wrong."

In its midyear review of the budget outlook, the White House projected that the non-Social Security surplus would be between $1 billion and $6 billion for the next three years before increasing to $19 billion in 2005 and then growing steadily for the rest of the decade.

But the administration was able to show a non-Social Security surplus for the next few years only by making a series of assumptions and policy changes that Democrats attacked as gimmicks.

They included a shift in the way the government accounts for Social Security revenues, economic growth assumptions that Democrats said were too optimistic and a decision not to include in the calculations the cost of tax and spending decisions that Congress is all but certain to make in coming months and years.

The new projections from the Office of Management and Budget showed that the government would run a total budget surplus for the fiscal year ending Sept. 30 of $158 billion, of which $157 billion would come from Social Security.

Both parties have agreed over the last several years that the Social Security surplus should be off limits for tax cuts or general spending, creating a standard for fiscal discipline that they are now sure to have trouble meeting.

The surplus for next year, the administration projected, would be $173 billion, with only $1 billion of that coming from outside of Social Security. The total surplus in 2003 would be $195 billion, with $2 billion coming from outside Social Security.

If those figures prove correct, it would mean that the government would spend nearly all of the surplus generated this year and in coming years by part of the Medicare system, money that Democrats and most Republicans in Congress had also sought to put off limits. The Medicare surplus this year is about $30 billion.

The administration projected gradual improvement in the fiscal outlook over the rest of the decade. The total surplus for the next decade should be $3.1 trillion, the White House said, compared with a projection of $5.6 trillion earlier this year, before passage of the tax cut and the economic slowdown.

The non-Social Security surplus for the next decade should be $575 billion, compared with a projection of $3.1 trillion at the beginning of the year. The 10-year projection for the Social Security surplus was largely unchanged, at $2.5 trillion.

The Congressional Budget Office is scheduled to release its own updated surplus forecast next week. Members of both parties said it might show the government crossing the line into spending Social Security surpluses.

The situation holds opportunity and peril for the administration and Republicans in Congress.

To some degree, the administration's goal in pursuing the $1.35 trillion tax cut was to get as much of the surplus as possible out of Washington so that Congress could not spend it.

Eliminating nearly all of the non-Social Security surplus limits the ability of Democrats -- or Republicans for that matter -- to propose big new spending programs. It also makes it easier for the administration to demand a re-examination of spending on programs that it opposes on policy grounds or judges to be ineffective.

"The budget is tight, and that's exactly what we designed and exactly what we wanted," said Representative Jim Nussle, R-Iowa, chairman of the House Budget Committee.

But the budget may be so tight that Bush's own plans will be among the first to suffer. Conrad and Sen. Robert C. Byrd, D-W.Va., chairman of the Senate Appropriations Committee, said they would oppose Bush's request for an $18 billion increase in military spending next year.

The president's plans for the Pentagon also may face problems in the Republican-controlled House. Nussle said he was "very troubled" by the White House's military spending request because it was not backed up by a detailed review of the Pentagon's long-term needs.

Members of both parties said Bush could have trouble obtaining money for his education and energy plans and would find it more difficult to finance creation of private investment accounts within Social Security.

More broadly, the administration is at risk of being blamed for blowing the surplus, a contention that Democrats are turning into a battle cry as they prepare for the 2002 election.

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