Chairman Bill's Big Blue Book

March 20 1998 3:30 AM

Chairman Bill's Big Blue Book

When did the federal budget become a polemic?

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The second exception is that we are to forgo using the prospective budget surplus for tax cuts or expenditure increases (other than those proposed by the president) "until we have a solution to the long-term financing challenge facing Social Security." It is here that we have the greatest need for more explanation.

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The formulation offered gives rise to the ridiculous table showing, for years beginning in 1999, an excess of receipts over outlays, exactly balanced by an item called Reserve Pending Social Security Reform, and a resulting surplus/deficit that is exactly zero. By that logic we had a zero deficit every year for the past 30 years, except that the "reserve" was negative.

Moreover, the little word "until" contains a number of ambiguities. Some have interpreted it as meaning that the surplus would be used to solve the financial problems of Social Security. That has now been denied by the Office of Management and Budget. Which leaves open the question of the president's intention for the use of the surplus after some other solution, such as cutting Social Security benefits or raising payroll taxes, has been found. Would we then be free to spend whatever surplus there is in the unified budget? Or would we still want to apply some of that surplus to reducing the federal debt accumulated during the 30 years of deficits? Could we start spending it even if the discovered solution for Social Security's long-run problem didn't start to have a financial impact for another 20 years? In other words, is the "reserved" surplus to be part of any long-term fiscal program or only a carrot to be used to induce a solution to Social Security, after which the carrot can be eaten?

I raise these questions not to disagree with what may be the president's program but to illustrate the inadequacy of the budget as an explanation of it.

When I told a friend of my problems with the budget as an explanatory document, he replied, "But you're the only person who reads it." That may be true. But 15,000 copies were printed.

Herbert Stein, a senior fellow at the American Enterprise Institute, was chairman of the Council of Economic Advisers under Presidents Nixon and Ford. He is a member of the board of contributors at the Wall Street Journal.