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Analysts project big federal surpluses

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WASHINGTON — The Congressional Budget Office is projecting an enormous $2.17 trillion in federal surpluses over the next decade, further fueling the election-year battle over what to do with the government's mountains of excess cash.

The estimate by the nonpartisan CBO, contained in agency documents distributed on Capitol Hill, was a bit higher than expected but not a major surprise. CBO's projection had been expected to somewhat exceed last month's estimate by the White House budget office, which more than doubled its own earlier 10-year surplus forecast to $1.87 trillion.

Even so, the new figures — which exclude Social Security's own huge surpluses — seemed likely to give added impetus to lawmakers and candidates seeking to cut taxes or to boost spending for prescription drug coverage, defense and other programs. CBO planned to officially release the numbers Tuesday afternoon.

In particular, the figures should help Texas Gov. George W. Bush, the likely Republican presidential nominee, argue that his proposal for more than $1.3 trillion in tax cuts over 10 years can be paid for by budget surpluses without eroding Social Security's trust funds.

Vice President Al Gore, the Democrats' presumed presidential nominee, has argued that Bush's plans are reckless. Gore says the combined costs of Bush's proposed tax cuts, increases for defense and other programs, plus lost interest savings would eat into Social Security.

The new numbers could also make it harder for congressional Democrats to argue that cuts Republicans have proposed in the estate tax, taxes paid by married couples and other levies are unaffordable. Underlining that, since President Clinton unveiled his administration's higher surplus projections, dozens of House and Senate Democrats have voted for GOP tax bills.

At the same time, the new figures could weaken GOP arguments that Clinton's proposal for adding a new Medicare prescription drug benefit is too costly. Though its 10-year cost is unclear, a House-passed Republican version is projected to cost about $40 billion over five years. CBO said it believes Clinton's proposed drug coverage and other new Medicare benefits he would create would cost $310 billion over 10 years — nearly $60 billion higher than the president's price tag.

And as congressional Republicans begin pushing through the 13 annual spending bills that finance federal agencies, the higher projections could help Clinton win some of the extra billions he wants for schools, foreign aid and other programs.

Hoping to head off a spending spree, Senate Budget Committee Chairman Pete Domenici, R-N.M., told reporters that lawmakers "ought not do any damage this year" by enacting expensive new programs, such as Clinton's proposed prescription drug benefit under Medicare.

Both the administration's and CBO's higher projections are due to the economy's continued healthy performance, which has exceeded what was expected when both budget offices issued their last projections early this year.

Even so, though many economists consider it unlikely, the projected surpluses could shrink dramatically — or even vanish — should the economy hit a prolonged, severe downturn.

Overall, CBO now envisions a $4.56 trillion budget surplus from 2001 through 2010 — $2.39 trillion from Social Security and $2.17 trillion from all other programs.

Two-thirds of the projected non-Social Security surplus — $1.48 trillion — would occur from 2006 through 2010. Generally, budget forecasts are less accurate the further into the future they extend.