[PEN-L:8825] RE: US government budget surplus

["Max B. Sawicky" <sawicky@xxxxxxxxxxxxxxxx>]

The Post is what should be satirized for years of mindless
babble about deficits, helping to give rise to the mindless
reform of welfare and restraint on public investment.

As Ellen noted, all the dirt is in the OMB's mid-session
review and CBO reports, all of which are free on the web.
I haven't read the latest poop yet, just coming back
from vacation.

A good part of the series of improvements in forecast
arise from the forecasters' clinging to the notion that
UE cannot long remain below 5.6 or thereabouts.  So they
forecast a slide downwards, it doesn't happen, and then
they have to revise.  They do not change the long-run
projections, but the change in the 'glide path' changes
the entire forecast/projection period.

Another unexpected element was a surge in income tax
receipts.  Part of this is due to the stock market --
people cashing in on capital gains, but part is not.
The bubble is not projected to continue to improve
tax receipts, but again a change in the near-term
shifts 'doomsday' out further.

Another improvement has been reduced medicare/
medicaid spending (i.e., less growth than
expected).  This is not expected to persist
either.

A deceptive aspect of the the forecast is that
it proceeds from current budget law, meaning the
caps on nominal discretionary spending (both
defense and domestic).  As magnitudes go, this
is minor.  Discretionary spending makes little
impact on the long term outlook if it goes up;
this holds as well for the defense component.
The Balkans conflict is a blip in the defense
spending path.  Some huge, expensive policy
change would be a different story, but no such
change is in the cards right now.  There will
probably be a limited raid on this year's surplus
to finance a budget deal.

Very broadly speaking, discretionary spending
is analagous to an arithmetic series, while
entitlement spending and revenue to geometric
or exponential ones (under current political
circumstances).

The forecast does factor in a recession, though it
does not try to predict the specific years when
it occurs; it merely shifts the trend line a tad.

Right now the budget 'doomsday' -- when deficits
start blowing up -- has been pushed well beyond 2050.
Note that this projection allows for discretionary
spending to grow at the rate of GDP (which would
be a great improvement from current policy), and
for full benefits to be paid under Social Security,
Medicare, Medicaid, etc.  The only hitch is that
general revenue would be needed to pay Social
Security and Medicare benefits about 20 years
from now (sooner for Medicare).

That's why it's time for liberals to drop their
fixation with the trust fund 75-year actuarial
balance.  There's plenty of dough to pay full
benefits, as far as the eye can see.

>From a left political standpoint, casting doubt
on the surplus projections is insane.  So let the
insanity begin.

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