“As we enter a new era of surplus management, what we do with the surplus will provide a critical test of fiscal discipline for Congress and the new Administration. The question is, how much reliance should lawmakers place on 10-year budget projections that CBO points out could be off by $3 trillion in either direction given alternative assumptions? While we hope fiscal discipline will survive these surpluses, policymakers must not lose sight of the larger fiscal picture that is framed by the retirement costs of the baby boomers,” said Concord Executive Director Robert Bixby.
“Unfortunately, CBO is not a branch of the U.S. Mint. CBO does not make money, it makes projections, which over a 10-year period are as fragile as they are tempting. Simply holding discretionary spending to inflation, as CBO has projected, will require a level of fiscal restraint far in excess of that demonstrated over the last several years,” Bixby said.
“Financing permanent commitments with projected surpluses is like buying a new wardrobe before you've lost the weight. You're assuming that something desirable will happen before it actually takes place. While we can hope that these surplus dreams come true, we should not rely on a surplus of optimism,” Bixby said.
The Coalition reiterated its long-held position that the highest priority for any surplus that materializes is to help prepare the economy for the demographic tidal wave that will begin to manifest itself at the end of the current 10-year budget window. “The baby boomers will begin to collect Social Security benefits in 2008, and will qualify for Medicare in 2011. Neither program is fiscally sustainable in its current form. Until we have dealt with that fundamental generational problem, we should save every surplus dollar that comes our way,” Bixby said.
The Concord Coalition was founded in 1992 by former Senator Warren Rudman (R-N.H.), the late Paul Tsongas, former Democratic Senator from Massachusetts, and former Secretary of Commerce Peter Peterson. Former Senator Sam Nunn (D-Ga.) joined Rudman as co-chair of the organization in 1997. The Concord Coalition is a nonpartisan, grass roots organization dedicated to balanced federal budgets and generationally responsible fiscal policy.