Editorial: Surplus is quickly evaporating

Tuesday, Aug. 21, 2001 | 8:51 a.m.

George W. Bush told the American people that they could have it all. On the campaign trail, Bush said that if Congress passed his 10-year, $1.3 trillion tax cut, there still would be enough money left over to pay for essential government programs, including a brand-new prescription drug benefit for Medicare recipients. Both before and after the election, the Sun editorial page joined others in warning that such a huge giveaway would be fiscally irresponsible. Bush is still five months away from completing his first year in office, but there already is evidence that the president's tax cut isn't spurring the economy and that the budget surplus is evaporating. Democrats in Congress are saying there may have to be spending cuts to offset the revenues lost from the tax cut and a sluggish economy.

The White House has dismissed concerns about the eroding surplus, arguing that there is plenty of funding. "We are awash in surplus money," said Mitch Daniels, the White House budget director. "We ought to call a cease-fire and congratulate each other." But the surplus this year is only expected to be $160 billion, considerably less than the $275 billion surplus that the White House and the Congressional Budget Office had predicted earlier this year. The administration's downplaying of the surplus' importance is a refusal to acknowledge that a key reason why the economy did so well during the 1990s was due to the fiscal discipline by President Clinton and a Republican-controlled Congress. In 1992 the deficit was $290.4 billion, but a level-headed approach significantly reduced the deficit so that by 2000 there actually was a $237 billion surplus.

If there were signs that a tax cut would actually spur the economy, and be fashioned in a way that all Americans could receive these benefits, then a case could be made for chipping away at the surplus. But so far there hasn't been any indication that this extra money will give the sagging U.S. economy the jump-start it needs. Bush also contends that there will be 3.2 percent economic growth in 2002, a forecast that is rosier than what private economists are saying or what the Congressional Budget Office is expected to forecast next week. The administration also is receiving criticism for using an accounting gimmick in the Social Security trust fund that could free up $4.3 billion for other government programs.

This is what it has come down to -- smoke and mirrors. The Bush administration wants to shift attention away from the fact that it has engineered a tax cut that may very well undo many of the gains created by fiscal restraint during the 1990s.