When the word surplus first began appearing in the federal budget dictionary a short time ago, both parties in this divided government were thrown into a frenzy of creativity on how best to spend the loot. So far, they haven't done much but argue.
While they have been quarreling, the estimated surplus — the federal tax take less spending — has just kept growing. President Clinton was able to announce this week it would be $1 trillion higher than his forecasters thought it would be only four months ago.
While the president attributed this to the roaring economy, another factor is that we have a dysfunctional government whose warring branches can't agree on what to do with the money pouring into the treasury.
President Clinton offered Republicans a deal. He will buy into their tax cut to lighten the "marriage penalty" if they will accept his plan for an expansion of Medicare to subsidize prescription drugs for the elderly. So far, the GOP seems less than enthusiastic, and both sides have gone back to blaming each other for the partisan gridlock.
But is gridlock all that bad? It is effectively keeping political hands off the prosperity windfall so it can be used to reduce the national debt faster than anyone thought possible only a few months ago. Currently, the projection is that the $3.5 trillion publicly held debt will be retired in 2012, a year earlier than had been projected.
Clinton now estimates the unified federal surplus at a staggering 10-year total of $4.2 trillion. Gene Sperling, his economic adviser, says most of that is from Social Security payroll tax receipts in excess of federal receipts. By law, this part of the surplus must be used to pay down the debt and cannot be drained off for any other purpose.
But the remainder — the $1.87 trillion non-Social Security surplus for the next 10 years — now becomes a colossal political pot of gold. The Republicans want the money for a major tax cut, contending that the government is getting rich because citizens are taxed too high. The Democrats want to use it for a variety of unfulfilled national needs, including the prescription drug benefit that will stop the spectacle of seniors boarding buses to Canadian pharmacies to stop from being ripped off at home. And that, more or less, is the ground on which the election will be fought.
Locking away Social Security surpluses was achieved by an agreement for which both parties have taken credit. The purpose was to insulate Social Security from current budgetary pressures. But that noble purpose has now been twisted so that the rest of the surplus is treated like manna that the government just has to spend or give back in the form of tax cuts.
Not doing either is something the political world does not like to talk about, but it may be the best use of all. It would devote the full force of the current prosperity to debt reduction, cause the annual bill for interest on the debt to shrink faster and get the national debt to zero earlier.
Some economists think Social Security insolvency projected for the year 2037 could be averted by just such budgetary prudence now.
There's a potential fly in the ointment. If the economy takes a turn for the worse, or if there is a major war, revenues may not grow quite as dramatically as current projections show. Indeed there could be a return to deficits if a major tax cut is passed, Sperling argues. That would saddle a future president with the poisonous job of raising taxes.
But, when pressed, Sperling concedes it would be equally difficult, if things turn sour, to take away a new program like Medicare prescription drug benefits financed by projected surpluses.
By contrast, if we have surpluses, they could be used to pay for an emergency without hurting anyone except the politicians who want to use it now.