Tax Cut And Budget Surplus

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

The New York Time  (Jonathan Fuerbringer Sunday Dec. 24, 2000) reported
that according to chief economist John Youngdahl of Goldman Sachs, even
with a recession and a $1.3 trillion 10 year tax cut, plus zero growth for
the next two years, the Federal surplus is still expected to be $245
billion in 2001, $203 billion in 2002, $180 billion in 2003, $178 billion
in 2004, $183 billion in 2005 and modest increases in the next five years
to over $400 billion in 2011 ($800 billion sans tax cut).

By the second quarter of 2001, the one year T bill will be retired.  The
popular two year note will be reduced to $10 billion a quarter from the
$10 billion a month now. 30-year bonds, already cut to $15 billion a year
from $47.2 in 1991 may not be issued further, as well as now 4-year-old
TIPS (Treasury Inflation Protected Securities).

Thus the argument of whether tax cut or debt reduction is a phantom one.
Also, the concentration of the reduction on short term Treasury bills, the
yields on them may experience downward pressure.

It seems that Bush can get his tax cut and still have some $200 billion a
year with which to lean against the recession wind. The question is; will
he?

Henry C.K. Liu