In January, the Congressional Budget Office (CBO) increased the estimate of the federal budget surplus for FY 2002 to $313 billion, $142 billion of which was from the non-trust fund portion of the budget. In May, the CBO revised estimates to reflect the effect of the Tax Relief Act showing the projected budget surplus for 2002 had shrunk to $261 billion, the non-trust fund portion from $142 billion to just $52 billion. By July, the Treasury announced that it would borrow $51 billion needed for tax rebates.

Compounding the problem, the CBO estimates assume that Congress will adhere to spending caps. But in recent years Congress has exceeded those caps by tens of billions of dollars. The 2002 budget resolution is about $106 billion over the cap.

The dwindling surplus comes as a set of budget rules known as the Budget Enforcement Act will expire next year. The rules helped provide budgetary discipline for most of the 1990s leading to the surplus. Without the renewal of these or a similar set of guidelines the government may create deficit spending conditions which could have grave implications for Social Security and Medicare.

Source: "Preliminary Estimate of the Effect of the Economic Growth and Tax Relief Reconciliation Act of 2001, CBOÕs Current Budget Projections," Congressional Budget Office, July 26, 2001. Statement of Dan L. Crippen, Director Congressional Budget Office on Extending the Budget Enforcement Act before the Committee on the Budget, U.S. House of Representatives June 27, 2001.

For more on this click this headline"Will Seniors Pay the Price?"

October 2001