July 18, 2000

How Much of the New CBO Surplus Is Available for Tax and Program Initiatives?
by James Horney and Robert Greenstein

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The Congressional Budget Office today released new baseline budget projections that show non-Social Security surpluses of nearly $2.2 trillion over the next 10 years under current policies. Although CBO's projections are somewhat more optimistic than the baseline estimates released by the Administration a few weeks ago, the points made in the Center on Budget and Policy Priorities' July 7 paper, How Much of the Enlarged Surplus is Available for Tax and Program Initiatives? Available Funds Should be Devoted to Real National Priorities, (/cms/index.cfm?fa=view&id=439) apply as well to the new CBO projections. Those points are:

 

How Much Of the Surplus is Available For Initiatives?

CBO projects that non-Social Security surpluses will total nearly $2.2 trillion in 2001 through 2010 if policies are unchanged and discretionary spending is maintained at the current level, adjusted for inflation. But the amount that is realistically available to fund tax cuts and program initiatives is much smaller than that.

 

Assessing National Priorities

How Much of the Projected Surpluses is Available
to Fund Changes in Tax and Program Policies?
(in trillions of dollars)

Fiscal Years
2001 - 2010

CBO's July 2000 baseline projection of non-Social Security surpluses $2.2
Minus:
Medicare Hospital Insurance Trust Fund surpluses -$0.4
Amounts needed to maintain current policies -$0.6
Amounts likely to be needed for Social Security and Medicare reforms to achieve long-term solvency -$0.5
Remaining surpluses available to fund changes in current tax and program policies (including resulting increase in interest costs) $0.7

Whatever the amount that is available for tax and program initiatives, decisions about the best uses of this money should be made carefully and based on a vigorous debate about the needs and priorities of the nation. The emergence of large non-Social Security surpluses is a very recent phenomenon. Neither lawmakers nor the public have yet gone through a process of weighing the most appropriate uses of the surpluses and establishing priorities. Current Congressional proposals to use the surpluses seem to be more a response to short-term political currents before the fall elections — and to demands from interest groups that have been able to mobilize quickly and get to the front of the line (and in some cases, make large campaign contributions) — than the product of careful, systematic consideration of how to take advantage of the opportunity the economic boom presents to establish priorities for addressing the nation's most critical needs.