Are Projected Budget Surpluses Pie In The Sky?
January 20, 1999
The White House is forecasting budget surpluses amounting to about $4.5 trillion over the next 15 years. President Clinton says he wants to lock up about three-quarters of that in the Social Security and Medicare trust funds. Ten percent would go for higher domestic spending and defense. None would go for big tax cuts.
But respected economists are hoisting warning flags around the huge surplus numbers.
- First, when an economic downturn arrives, those surpluses may well vanish.
- The projections assume there will be no recessions during the next 15 years.
- Janet Yellen, the chief White House economist, acknowledges the "huge uncertainty" in forecasting 15 years out -- and adds that a "very small change in parameters driving the economy, like a tenth of a percentage point in the growth rate, can make an enormous difference."
- Moreover, government-watchers are highly skeptical that politicians can resist the urge to grab chunks of the money for expensive new spending programs -- witness the billions in "emergency" funds voted by Congress just this fall.
"I consider the possibility quite remote that the government can run a surplus of trillions of dollars for decades without using it to increase benefits or for other things," Stanford University economist Michael Boskin has warned.
Source: Jacob M. Schlesinger, "Clinton Surplus Plan Seeks to Trim Debt," Wall Street Journal, January 20, 1999.
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