No voodoo economics-yet

The incredible shrinking surplus is upon us, moving in briskly and proving larger than expected. Even more incredible-though shrinking fast-it is still the second largest surplus in U.S. history, thanks to the end of the cold war and to the fiscal responsibility of the Clinton administration and the last several Congresses. Why is the surplus shrinking?

As many economists predicted, the Bush tax cut, accounting for two-thirds of the decline, has taken a large chunk of federal funds. Declining tax revenues caused by the slowing economy accounts for the other third. But if the surplus is so big, why worry? Because, first, most of the surplus belongs to Social Security and Medicare and, in theory and recent practice, has been kept in the famous "lock-box" by both Democrats and Republicans; and second, President George W. Bush and Congress have spending plans that, if passed, would bring on deficit spending.

The meaning of these volatile trillions and their relation to the budget process and the future of Social Security and Medicare is difficult to grasp. Such large amounts of money (some of it mere projection) and the complexity of the federal budget lead many people to look at the consequences of a revenue shortfall (what will happen?). But some attention needs to be paid to how this happened.

For many Americans those consequences focus on Social Security and Medicare. Will there be enough for...

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