Putting the Surplus to Work
for Economic Growth
The government is reporting that there will be a record $ 237 billion budget surplus
for the current fiscal year -- an estimate which includes a substantial part of the
surplus coming from the social security budget, which was a segregated budget
prior to the Carter Administration but which has been integrated with the general
operating budget of the federal government since that time.
If that is reliable information, it means that the government has collected some
$ 1000 more than was necessary from every man, woman, and child in the country.
Aside from the question of shoring up the social security and medicare funds, which
are likely to begin showing deficits again with the 'retirement' of baby boomers some
ten or so years in the future, or applying the 'surplus' to 'pay-down' the debt of over
$ 6 trillion, envision for the moment what the impact on the economy would be were
that 'surplus' to be returned on an equal per capita basis to the citizenry.
Putting $1000 additional dollars into the hands of every American to spend, save,
or invest as they saw fit, there would be a tremendous leap in GDP, or, if we are
to accept the assumption that, with the economy operating at full employment
levels, fuel for inflation as much of it might be spent on the same level of production
of goods and services. Such inflationary pressures might make the better economic
policy decision to be of a form that stimulated investment by the 'refund' going to
the elements of the economy which would do the most investment -- the top income
But that is a flawed assumption, since there is a margin for expansion of the economy based on more efficient utilization of the structure of production and
increased production on the flawed statistic of capacity utilization which leaves
room for additonal output, even without the impact of investment enhancement
which would require a time lag to add to output, such a 'refund' could lead to a
big leap in GDP and National Income and expenditure.
It is not likely to happen that way. What goes to Washington is not likely to
be returned to the taxpayers. Even if Bush's proposals for big tax cut were to
materialize, it would not reach to those levels. But the dynamics of such a
refund would make it a very wise policy choice, resulting in a substantial growth
in government revenues on the economic stimulation which would take place.
That would result in greater surpluses in years to come, and an even greater
bonus in terms of revenue to finance social security, medicare, and debt retirement.
Clinton Reports Record 2000 Surplus
By JEANNINE AVERSA
.c The Associated Press
WASHINGTON (Oct. 24) - Flush with tax revenues from a booming economy, the federal government posted a record $237 billion surplus for the budget year that ended in September, the Clinton administration announced Tuesday.
It marked the third straight year of surpluses, something that hasn't happened since the late 1940s.
Social Security taxes provided nearly $150 billion of the surplus.
"This is the third surplus in a row - the first time our nation has done that in 51 years, since 1949 when Harry Truman was president,'' Clinton said on the South Lawn during an event to push his education initiatives.
Clinton said that in 1993, the federal deficit was $290 billion, the national debt had quadrupled in 12 years and economists predicted that this year, instead of a $237 billion surplus, we would have a $455 billion deficit.
Then he used the new surplus numbers to plug Vice President Al Gore's bid for the presidency.
"Working together we turned that around - not by chance, but by choice,'' Clinton said. ``I believe we have to first stay with what got us here - pay down the debt, strengthen the Social Security and Medicare systems ... and we need to then seize this opportunity to take the money that's left to invest in our future, especially education.''
The official announcement of the 2000 surplus comes only two weeks before voters elect a new president. A major point of contention between Gore and Texas Gov. George W. Bush, the Republicans' choice, has been what should be done with surpluses that are projected to total $4.6 trillion over the next decade.
Bush has proposed a $1.3 trillion across-the-board tax cut, while Gore has proposed smaller, targeted tax cuts and more government spending.
The government's 2000 surplus surpassed the previous record of $124.4 billion for fiscal year 1999 and came on top of a $69.2 billion surplus in fiscal year 1998. The 1998 surplus marked the first time the government had managed to finish in the black since 1969.
The last time the government reported three consecutive years of surpluses was in 1947, 1948 and 1949.
The record-breaking economy is in its longest-ever streak of uninterrupted growth. Americans are enjoying plentiful jobs, low inflation - outside of the recent burst of energy prices - and rising incomes. The prosperity also is helping to generate more tax revenues.
Economists say one of the cornerstones to the prosperity has been low unemployment. The surging economy pulled the nation's unemployment rate back down to a three-decade low of 3.9 percent in September from an already low 4.1 percent in August.
Clinton last month had estimated a surplus of around $230 billion for the recently ended fiscal year and the Congressional Budget Office was predicting $232 billion.
Revenues for fiscal year 2000, which ended Sept. 30, totaled $2.03 trillion, while expenditures came to $1.79 trillion, the Treasury Department and the Office of Management and Budget said.
Individual tax payments totaled $1 trillion, compared with $879 billion in fiscal year 1999. Payments from corporate taxes came to $207.3 billion, up from $184.7 billion.
The biggest spending categories in fiscal 2000 were: Social Security, $441.8 billion, up from $419.8 billion in fiscal 1999; programs of the Health and Human Services Department, including Medicare and Medicaid, $382.6 billion, compared with $359.7 billion; interest on the public debt, $362.1 billion, up from $353.5 billion; and military spending, $281.2 billion, up from $261.4 billion.
Copyright 2000 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. All active hyperlinks have been inserted by AOL.
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