PERSPECTIVES ON THE BUDGET SURPLUS*

Congressional Budget Office=s long-term forecast. All opinions are our own and should not be ascribed to any of the organizations with which we are affiliated. This paper provides alternative measures of federal budget surpluses over 10-year and long-term horizons. Official baseline budget forecasts are based on a series of statutory requirements that may be at variance with reasonable expectation. More plausible notions of current policy toward discretionary spending, taxes and retirement trust funds imply that surpluses over the next 10 years will be substantially smaller than the baseline forecasts indicate. Properly accounting for long-term imbalances in social security and the rest of the budget implies that, under plausible definitions of current policy, the federal government faces a long-term shortfall. 1After decades of deficits, the federal budget has recently turned to surplus, and projections suggest that under current policies the surplus will rise significantly during the next decade. The most recent Congressional Budget Office baseline forecast, released in July, 2000 (CBO 2000c), projects surpluses between $4.5 trillion and $5.8 trillion between 2001 and 2010. These are divided between (off-budget) surpluses in the social security trust fund of about $2.4 billion and on-budget surpluses tha