Return the Surplus to Those Who Earned It

This article appeared in Copley News Service, November 2, 1999, and in the Washington Times on November 8, 1999.
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The standoff over the budget between the Republican Congress and Democratic president has had a curious byproduct: leaving more money to pay off the national debt. Some analysts are lobbying to devote future surpluses to the same purpose, perhaps eventually paying off the entire $5.6 trillion national debt, or at least the $3.6 trillion in Treasury bonds owned by the public.

Eliminating not only the budget deficit but also the national debt is obviously a worthy goal. Incredibly, interest payments were thesecond-largest federal expenditure in 1999.

Although low interest rates have been reducing this burden, it willremain above $250 billion annually despite expected surpluses throughout thenext decade. We all will be paying the price of Washington's past profligacyforyears to come.

However, it is more important to provide tax relief to Americans whohave been bearing that burden. According to the Tax Foundation, theper-capita expense of taxes this year is $10,298; the burden is even heavier inhigh-tax states such as Connecticut, New Jersey and New York.

This expenditure dwarfs everything else in people's budgets: shelter ($5,833); health care ($3,829); food ($2,693); transportation ($2,568); recreation ($1,922); and clothing ($1,404). Separate federal ($7,026)andlocal ($3,272) levies, and taxes, still top the list, while taking third placeaswell!

The rise in taxes has been particularly sharp during the Bush-Clinton administrations of the 1990s. Because of these two spendthrifts, everyAmerican pays an extra $2,000 to accommodate the steadily expanding federalbehemoth.

Of course, rising incomes in a booming economy have helped mask theimpact of higher taxes. But that doesn't make a serious tax cut any lessimperative.

Reducing the tax burden would strengthen the economy at a time whensome analysts fear an approaching slowdown. With the Federal Reserve hintingat higher interest rates and pessimists predicting the imminent arrival ofthe stock market bear, let Americans keep a bit more of their incomes.

In a study for the Institute for Policy Innovation, economists Aldonaand Gary Robbins figure that the GOP's modest $792 billion tax cut wouldgenerate enough new economic activity to cover nearly a third of the lostrevenue.

Cutting taxes would also be the right thing to do. People are payingtoomuch for too little. The budget is larded with pork, unnecessary programs,special interest subsidies and blatant waste. The president is insultingpeople's intelligence by claiming there's no money to give back.

A tax cut would not be some special benefit to taxpayers. It wouldsimply return some of Uncle Sam's outrageous overcharges.

However, opponents of tax cuts routinely pull out their trump card:Social Security. We should pay down the national debt to save Social Security,they say.

Of course, this is the first time these people have ever shown anyinterest in reducing the national debt. Having spent years advocating a policy oftax, borrow and spend, they now denounce the debt they did so much toaccumulate.

In any case, the debt has nothing to do with Social Security. Becauseofthe demographic tsunami of more elderly, and more of them living longer andolderby around 2014, the system will be spending more than it takes in.

Cutting the debt won't change that. Social Security is anunsustainablePonzi scheme that is breaking down as ever more retirees depend upon everfewer workers.

Of course, lower interest payments would make it easier to shiftgeneral revenues to Social Security. But cutting nonessential programs thatdominate the budget would achieve the same end. And those programs should beeliminatedin any case.

However, the savings shouldn't be poured into what will eventuallybecomea bottomless pit. By 2070, the annual flood of red ink will be $7trillion.In fact, between 2010 and 2070, the system is committed to paying out $140trillion more than it is projected to take in.

Social Security can be fixed only by allowing younger workers tochoose private investment plans, thereby yielding them better benefits andeliminating their claim to a tax-paid retirement. There would be a short-term burdenof paying off the elderly who rely on the system. But over the long term,spending would fall.

If we reform the system. Not if we retire the debt.

The federal government expects to collect $22.8 trillion in revenueoverthe next decade. The niggling Republicans have proposed a tax cut of just3.5 percent. Even that, however, argues the president, is too much.

The surplus doesn't belong to the government. It belongs to thetaxpayerswho were overtaxed. It should be returned to its rightful owners.