“Presidential candidates George W. Bush and Al Gore have placed their respective budget blueprints at the center of the 2000 campaign. Both advocate committing a substantial portion of the projected $4.6 trillion budget surplus over the next 10 years to new initiatives ¾ whether tax cuts or spending increases. Moreover, both promise to nearly eliminate the $3.4 trillion publicly held national debt within a decade.
Big tax cuts, new entitlements, higher spending on popular programs and debt reduction all at the same time? It sounds too good to be true, and it probably is. Unprecedented surplus projections have allowed Gore and Bush to build a $4.6 trillion field of dreams. Will the voters come? Before buying 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 candidates' budget blueprints could land us back in the red.
...The first thing to keep in mind about the $4.6 trillion surplus is that it doesn't exist. The money is not sitting in a vault at the Treasury Department waiting to be spent on new programs or rebated in the form of tax cuts. It is a projection of what might happen given a set of assumptions about the economy, revenues and spending. Slight, and entirely conceivable, changes in those assumptions produce dramatically different results over a period as long as 10 years.
A key assumption behind the $4.6 trillion surplus projection is that for 10 years discretionary spending will grow no faster than the rate of inflation, roughly 2.7 percent a year. While on paper this may sound plausible, the reality is that since 1962 there has not been a single period in which discretionary spending grew no faster than the rate of inflation for 10 consecutive years.
…However, a very different pattern has emerged with the development of budget surpluses. Since fiscal year 1998, discretionary spending has increased from $555 billion to a likely level of at least $652 billion in fiscal year 2001 ¾ an average annual rate of 5.5 percent, more than double the rate projected in the CBO baseline. If discretionary spending continues to grow at the same rate it has over the past three years, two-thirds of the projected non-Social Security surplus vanishes. (see Current Trend Baseline 2001-2010 (Requires Adobe Acrobat Reader))
Building the Field of Dreams ¾ The Candidates' Plans for the Surplus
- Both Presidential candidates begin with the assumption that the total budget surplus over the next 10 years will reach $4.561 trillion. This is the most recent projection of the CBO, assuming that discretionary spending (non-entitlements plus interest) will grow no faster than the rate of inflation.
- Both candidates pledge that the ‘off-budget' Social Security surplus, which accounts for $2.388 trillion of the total (52%), will be reserved for either debt reduction (Gore) or a combination of debt reduction and Social Security reform (Bush).
- The remaining $2.173 trillion ‘on-budget' surplus is then used for tax cuts, new spending, and additional debt reduction.
- The money used for new policy proposals (tax cuts and spending increases) is no longer available for debt reduction, which increases the government's debt service costs. Any unallocated surplus constitutes a margin for error, which automatically reduces the publicly held debt.
- The major difference between the two plans is in how each would deal with the on-budget surplus. For purposes of this analysis, The Concord Coalition gives each candidate the benefit of the doubt by assuming that their respective estimates of their policy proposals are accurate. It should be noted, however, that substantial disagreements exist over the cost estimates of many items. (see chart: Surplus Field of Dreams (Requires Adobe Acrobat Reader))
- Imbedded in the numbers are a number of ‘offsets,' which are frequently unspecified. For example, the Bush spending proposals include $196 billion of presumed offsets for unspecified ‘government reforms.' Without these offsets, the Bush spending proposals would cost $475 billion
- Percentage of the non-Social
Security surplus committed to new policies:
Including offsets Not including offsets Bush 88% Bush 97% Gore 66% Gore 75%
The Concord Coalition believes that policy makers, including the Presidential candidates, should resist the temptation to “pay for” tax cuts or entitlement expansions with projected budget surpluses. These surpluses are not money in the bank. They are based, to some extent, on optimistic assumptions about discretionary spending and to another extent on continued favorable economic trends… The Concord Coalition agrees with CBO's observation that, ‘projecting the economy and the budget under [current] circumstances is more uncertain than usual.' In other words, the candidates may just be playing on a field of dreams.”
The Concord Coalition is a nonpartisan, grass roots organization dedicated to balanced federal budgets and generationally responsible fiscal policy. Former U.S. Senators Warren Rudman (R-N.H.) and Sam Nunn (D-Ga.) serve as Concord's co-chairs and former Secretary of Commerce Peter Peterson serves as president. The organization does not endorse, support or oppose candidates for public office or political parties.