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23 August 1999

Our current howler: Mort’s mots

Synopsis: Morton Kondracke’s words convinced us. We need to create a basic record about the projected surplus.

Commentary by Morton Kondracke
The Beltway Boys, Fox News Channel, 8/21/99

The Trillion-Dollar Problem
Editorial, The New York Times, 7/12/99

Honey, we lost the surplus
Jodie Allen, U.S. News & World Report, 8/16/99

Sharp tax cut based on shaky numbers
William W. Welch, USA Today, 7/29/99

Surplus Dreams
Richard W. Stevenson, The New York Times, 8/10/99

We finally decided the analysts were right when Mort Kondracke gave Tony the buzz:

KONDRACKE: Here's the buzz, Tony. It begins to look like it's going to be much more difficult than anybody's thought to get a big deal on Social Security, Medicare, taxes and so on at the end of this [congressional] session. It takes $581 billion out of the $1 trillion non-Social Security surplus just to pay for existing programs. That leaves 420 billion left for tax cuts. The Republicans will never go for that small an amount.

"It takes $581 billion out of the surplus just to pay for existing programs?" What a convoluted way to put it—but one that echoed the New York Times, in its July 12 editorial (see THE DAILY HOWLER, 8/20/99):

THE NEW YORK TIMES: A more realistic approach would set aside a substantial part of the surplus to sustain current domestic spending and perhaps expand it in certain areas.

But if we have to use "a substantial part of the surplus" just to "sustain current spending" then to that extent, if you're speaking English, you don't have a surplus at all! After all, budgeters can always create a paper "surplus" by pretending they just won't spend in the future. But the "surplus" they generate in this way is imaginary, just like that emperor's new clothes. The Times and Kondracke torture the language, to keep an establishment story in place. They insist there is a trillion dollar surplus. It's a fantasy they won't let go away.

Mort's mots convinced us that the analysts were right, in a debate that raged here at DAILY HOWLER World Headquarters, following our series of dispatches last week discussing the alleged budget surplus. The analysts had insisted that we set a day aside to detail debunking critiques of the surplus; they wanted us to hail the scribes who had deconstructed the bogus projection. They argued that the illusory surplus would remain a big story, at least until the end of the fall; and when we saw Kondracke's ill-chosen words, we saw they were right in their judgment. The press will likely continue to pretend that there really is a big future surplus, back-sliding in deference to establishment dreams. We'll surely visit this topic again—so let's put some facts on that giant oak table we maintain here at THE HOWLER's sprawling campus.

How big a surplus can we really expect? Let's look first at Jodie Allen's brief treatment in the August 16 U.S. News:

ALLEN: The only reason there appears to be any surplus is that the 1997 "balanced budget deal"...ordered the Congressional Budget Office to base all future projections on a fantasy: that, starting with this fall's budget, Congress will make ever deeper cuts in domestic and military spending for three years and then vote no extra spending in the following seven. If the cuts aren't made, forecasters agree, there will likely be no surplus over the next decade except Social Security's. [Allen's emphasis]

Unlike Kondracke, Allen doesn't speak of a $420 billion surplus after current programs are funded. According to Allen, "forecasters agree" there will be no surplus—none—unless Congress makes spending cuts that are "a fantasy." To what forecasters does Allen refer? On July 29, William Welch gave a partial answer in a detailed USA Today piece.

Like Allen, Welch detailed the forecasting rules under which the CBO has to function. But then he presented a set of alternative scenarios, provided by that same CBO. Included in the CBO's four scenarios is one we'd surely regard as quite likely; if Congress "boosts spending by the rate of inflation" and "adds $7 billion to $20 billion a year for emergencies," the CBO estimates the ten-year surplus will total $46 billion—a far cry from the trillion dollars now projected, or even from the $420 billion Kondracke cited to Snow.

Richard Stevenson, in the New York Times, breaks the analysis down to components. Stevenson cites Thomas S. Kahn, Democratic staff director of the House Budget Committee, as the source for his analysis:

Step one: If discretionary spending just matches inflation through 2009, that would use $595 billion of the official $996 billion projected surplus. New surplus? $401 billion.

Step two: If Congress spends just $9 billion per year in emergency spending—that was the annual average through the 1990s—that would use another $90 billion. The projected surplus is now $311 billion.

Step three: The moneys spent in steps one and two cannot be applied to debt reduction. That will produce increased interest costs of $179 billion. The projected surplus: $132 billion.

Kahn takes another $30 billion off the surplus, "to pay for Social Security's operations over the next decade." Welch explains the matter no further; this takes Kahn to $102 billion.

Note: the projected surplus dips this low based on conservative spending assumptions. If discretionary spending exceeds inflation, or if emergency spending exceeds that of the 90s, the projected surplus drops even farther. Indeed, one of the scenarios which Welch attributes to the CBO imagines spending rising at a 4.3% annual rate. That would produce a ten-year deficit of $422 billion.

Virtually no one has suggested that Congress will adhere to the caps on which the surplus is based. But instead of directly saying what some have said—that the projected surplus is a sham and charade—many scribes are back-sliding badly, reverting to talk about the "era of surpluses," and to odd constructs like the one Mort employed. But even the buck-naked emperor knew it—if you're using the surplus to fund existing programs, to that extent you don't have a surplus. We suspect we'll be linking you back to this HOWLER as budget confusion increases this fall.


Visit our incomparable archives: Budget confusion ran rampant for two solid years in the1995-96 Medicare debate. See THE DAILY HOWLER, 8/20/99, for links to "The Speaker's New Language" and two shorter papers.

Tomorrow: The cocaine wars.