WASHINGTON -- President Bush's tax cut and the sluggish economy have combined to virtually erase the projected budget surplus not dedicated to Social Security this year and next, the White House estimated Wednesday.
The Office of Management and Budget projected a fiscal 2001 surplus of $158 billion, only $1 billion above the tax receipts that flow to Social Security. The revision is $123 billion less than the last estimate in April but the surplus still will be the second-largest ever.
The forecast envisions a similarly tiny non-Social Security surplus of $1 billion in fiscal 2002, which begins Oct. 1. That represents a $58 billion drop from the April estimate, for an overall surplus of $173 billion next year that is almost entirely Social Security.
The new figures for fiscal years 2001 and 2002 will add fuel to Democratic charges that Bush's 10-year, $1.35 trillion tax cut is squandering the surplus.
"I see no more irresponsible act than that of the Bush administration's tax cut," Sen. Robert C. Byrd, D-W.Va., who chairs the Senate Appropriations Committee, said in an interview Tuesday. "It was a tax cut based on faulty projections."
Republicans, led by the president, retort that even with the economic slowdown plenty of money is available for the tax cut, to meet government spending needs and to protect Social Security and Medicare. The OMB predicts that economic growth will pick up next year, partly due to the stimulus provided by the tax cut, which in turn would boost government revenues.
"We cut the taxes. It was the right thing to do," Bush said Tuesday during a visit to Independence, Mo. "It was the right thing to do for our economy."
According to the OMB forecast, the economic downturn will reduce government revenue by $148 billion over the next 10 years, mainly in lower income and corporate taxes in the early years. But an improving economy will increase revenue in 2005 and beyond, leading to an overall upward revision of almost $74 billion for the decade.
The 10-year surplus is forecast at $3.1 trillion, of which $2.5 trillion is Social Security. That leaves $575 billion for spending or tax cuts, down from $850 billion forecast in April. The total surplus before the tax cuts or other spending was pegged at $5.6 trillion.
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