Perspective Budget Surplus

For the first time in three decades the federal budget may generate a surplus. While no surplus is yet in hand, plans are being made to spend it. President Clinton in his State of the Union address linked projected federal budget surpluses to saving Social Security. His statement is misleading and diverts attention away from the real problem— low national saving. To begin with, there is no surplus when future promised benefits are taken into account. The present value of all expected federal outlays is far greater than the present value of all expected federal revenues, under current law and with reasonable economic and demographic assumptions. Even the budget surpluses now projected for the next decade would be insufficient to directly make up the difference. The answer to the saving shortfall is swift implementation of policies that enhance saving and investment. Good economic policy, not more meddling financed by surpluses, will improve our chances at higher living standards for the future