WASHINGTON – Congress and the Bush administration face the critical challenge this year of adopting a
framework for using near-term budget surpluses to help fill the huge long-term gaps in
federal entitlement programs and household savings, and to best further our continued
economic well being. This is certainly a more welcome challenge than eliminating budget
deficits, but it is every bit as vital.
are we concerned about?
are concerned that the mere prospect of very large, but highly uncertain, budget surpluses
is being used as an excuse to abandon fiscal discipline, creating the threat of renewed
non-Social Security deficits and failing to realize the full opportunity of paying down
the publicly held debt.
there is the fundamental long-term challenge, which The Concord Coalition has always
stressed, of setting aside sufficient resources to meet the huge retirement and health
care costs associated with the coming “senior boom.” The surpluses provide an opportunity to help meet
this challenge — but only if we are careful to preserve them.
question: How much should we be willing to gamble on 10-year
projections that the Congressional Budget Office itself says could be off by trillions of
Answer: The Concord Coalition believes that it is unwise to rely on
these projections to commit ourselves to a series of large escalating tax reductions over
a 10-year period, particularly in advance of addressing the huge and daunting future
deficits of Social Security and Medicare. Doing so would be to rely on the unreliable
while we ignore the inevitable.
We believe that fiscal
discipline is the key to providing for the unmet needs of the future.
from deficit reduction, and now surpluses, have helped provide the capital to increase the
productivity of American workers ¾
a major factor in the record growth of the last 10 years. Further gains in productivity
will become especially urgent when the retirement of the huge baby boom generation
virtually halts the growth in the size of the U.S. work force.
debt reduction is the government’s most direct contribution to net national savings.
Increasing national and personal savings is the single most effective policy the
government can pursue to promote long-term economic growth and retirement security. Budget proposals should be assessed in that
public debt is reduced to the low levels possible, other policies such as retirement
savings accounts also play an important role. Household savings are nowhere near adequate
to prepare for ever-lengthening retirements.
We recommend that as Congress and the Bush administration decide how best to deploy
budget surpluses, they be guided by the following framework:
the continued economic benefits of a stable fiscal policy by maintaining discipline and
avoiding both a spending spree and large escalating tax cuts.
is exceedingly unwise to lock in a large 10-year tax cut based on unreliable long-term
immediate moderate tax cut is justified and reasonable as a surplus dividend, given last
year’s surplus and in light of near-term economic and budgetary prospects.
a back loaded 10-year tax cut is not the right tool to provide short-term economic
particularly at the expense of the urgent long-term need to fund our senior entitlements
and retirement savings needs.
the full opportunity for paying down the public debt to the low levels possible.
a new set of firm, but realistic discretionary spending caps.
establishing a system of mandatory, individually owned retirement accounts to help
families build a more ample nest egg while alleviating concerns that future budget
surpluses will result in either higher spending or in a large build up of government-
owned private sector financial assets.
The Concord Coalition was founded in 1992 by former Senator Warren Rudman (R-NH), 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, grassroots organization dedicated to balanced federal budgets and
generationally responsible fiscal policy.