Ron Paul's Texas Straight Talk - A weekly Column

August 20, 2001

What Happened to the Surplus?

The congressional budget office recently released figures showing that the projected federal budget surplus for this year will be $75 billion less than originally forecast. Some economists and politicians believe the federal government could slip into deficit spending in 2002, and that the Social Security and Medicare trust funds could be threatened if revenues do not increase. Yet the facts about federal revenues and spending are often obscured in the debate, and the reality of government irresponsibility goes unreported.
First, any budget surplus is a single-year surplus only. The federal government remains trillions of dollars in debt, and interest payments on that debt represented a whopping 17% of all federal spending in 2000. So we should not kid ourselves that the federal government is fiscally stable simply because a booming economy greatly increased federal revenues over the last few years.
Furthermore, even the single-year surpluses are illusory when we consider that the Clinton administration raided Social Security and Medicare funds to claim a balanced budget. In reality, even the record revenues of the 1990s could not keep pace with the voracious spending appetites of Congress and the administration. So Social Security and Medicare funds were moved around to cover the difference between what was collected and what was spent each year. These unconscionable raids on your retirement and health care dollars should never be allowed, yet the practice has become commonplace in Washington. The sad truth is that the so-called Social Security and Medicare trust funds do not really exist at all, and taxpayers have every reason to be anxious about the future viability of both systems. Many Americans still believe that the FICA portion of taxes withheld from their paychecks has been set aside for them, but in fact the government holds nothing but IOUs that depend completely on future revenues. Congress and the administration should be forced to keep Social Security and Medicare funds completely separate before ever declaring that the budget is balanced.
Some want to blame the shrinking surplus on the modest Bush tax cut, but declining revenues cannot be the result of rate reductions that do not take effect until 2002. Others point to the slowing economy as the source of the problem, as federal revenues for 2001 are expected to be $50 to $75 billion less than 2000. Yet the real reason the supposed surplus is disappearing is quite simple: Congress spends far too much. In fact, Congress will spend nearly $2 trillion in 2002, 11% more than it spent in 2001. Until the spending spree is brought under control, we should fully expect Congress to exceed its budget and resort to accounting tricks year after year.
American voters should understand that Congress will always find a way to spend every last dollar sent to Washington. Remember, politicians get votes by promising everything to everyone, always at the expense of some other invisible taxpayers. Most politicians are unashamed of their unconstitutional pork-barrel spending, even highlighting during campaigns their "accomplishment" of spending more and more of your money. The federal government cannot maintain a budget surplus any more than an alcoholic can leave a fresh bottle of whiskey untouched in the cupboard. We must change our perception that a budget surplus is healthy for the economy, because every dollar parked in the federal treasury ultimately is spent by Congress. Those dollars could have been spent, saved, or invested in the private marketplace. With a spendthrift Congress, high federal revenues simply mean more federal spending. The only way to end the unconscionable waste is to drastically reduce federal revenues by cutting taxes. Voters need to regain control of the nation's finances by rejecting the big spenders at the ballot box.