Tuesday, 08 May, 2001
What To Do With A Budget Surplus?
Much talk lately of President Bush's proposed tax cut. $1.6 trillion, $1.3 trillion, whatever. The numbers are big enough to be almost incomprehensible. The discussion has ranged all over the map, from "cutting necessary programs" to "a giveaway for the rich" and "a boost for the economy." You see alternatives every day, and reasons why the alternatives either won't work or are a bad idea. Every special interest group has an axe to grind, and few people step back and look at the situation objectively.
The most important thing to note is that the surplus everybody talks about doesn't exist. It's not like the Treasury department is sitting on a trillion dollars that it doesn't know how to spend. On the contrary, the Treasury is sitting on a debt of over five trillion dollars that it doesn't know how to pay off, but I'm getting ahead of myself. This tax cut is based on a projected surplus of some two trillion dollars over the next ten years, and is conditional on revenues actually meeting expectations (among other things). Even if Congress passes it--which seems likely at this point--I won't hold my breath waiting for an actual decrease in my income tax.
What surprises me more than anything else is the whole debate about what to do with a surplus. Let's see, we're five trillion dollars in the hole? Interest payments alone are costing us $350 billion per year, or close to 20% of the annual federal budget. Given a population of about 290 million, that's about $1,200 per person per year. The most effective use of any surplus would be to pay off that debt. In less than 40 years, we could lower taxes and have $350 billion more for our Congressmen to squander on pork barrel projects and stupid social programs.
I know, the idea smacks of fiscal responsibility, so the thought is anathema in Washington. Oh well.