The ten-year, $1.35 trillion dollar tax manipulation was enacted during a time of projected surpluses that have disappeared faster than the plan's first round of $300 refund advance checks. When the realization that the President's tax plan did not do enough to stimulate the economy hits Congress, Bush's grasp of effective fiscal policy will again be called into doubt. President Bush's overzealous and unfair tax cut has succeeded in putting the future of lower- and middle-class Americans in jeopardy so that the wealthy can receive greater benefits.

At an emergency meeting called September 7 at the White House, VP Dick Cheney, President Bush, Senate Minority Leader Trent Lott, and House Speaker Dennis Hastert met to discuss the administration's fiscal woes. Downplaying the fact that the meeting was unscheduled, Bush said that it was to discuss the spike in the unemployment rate to 4.9%. Aides present at the meeting said the prospect of spending a portion of the Social Security trust fund was discussed, and alternative methods to resolve the budget crisis were outlined. Hastert allegedly proposed a plethora of spending cuts based on the Social Security surplus and a reduction in the increase of defense spending this year.

President Bush, slipping into the royal plural, said nothing about the surplus crisis, but instead focused on the economy in general: "I want the American people to know we're deeply concerned about the unemployment rates, and we intend to do something about it." What Bush intends to do about the unemployment rate is yet to be seen.

By first cutting taxes and then committing not to spend any of the Social Security surplus, the President has hobbled his ability to help the ailing economy. Without the spending power of the Social Security surplus, Bush is left with only the Federal Reserve to stimulate the economy. Another tax cut or increased spending is out of the question as long as the Social Security surplus is left intact.

Thomas Gallagher, an analyst with the International Strategy and Investment Group, commented, "There's no economic consequence to a modest use of the surplus." Gallagher questioned what effect the White House can have without additional spending, saying, "To the extent we may be into a post-bubble economy characterized by weak demand for a period of time, where an active policy of fiscal stimulus would be appropriate, sticking to this doctrine [of not spending the Social Security surplus] would appear to preclude that."

Bush tapped the amazing prosperity of the last eight years and is now unable to support or offer any aid to the people who paid for his tax cut. The American workers whose projected earnings were supposed to pay for the tax cut are now losing their jobs with little chance of help from the President to revive the economy.

Since the beginning of the year, the Congressional Budget Office has almost halved the projected surplus over the next five years. In April, this year's surplus was projected at $275 billion. In May, the CBO said the five-year surplus was estimated to exceed $2 trillion. Now, the projections by the CBO are calling for a FY 2001 surplus of $153 billion and a five-year surplus of slightly less than $1.1 trillion. If you discount Social Security revenues from that, the "on-budget" surplus has evaporated, leaving an initial projected deficit of—and this is a tentative projection—$9 billion. Projections released at the beginning of September foresee a deficit possibly exceeding $15 billion. That deficit is paid for out of Social Security revenues, the exact money that the Bush Administration promised to protect during the campaign, if anyone remembers the word "lockbox."

The situation has gone from a pork-barrel dream to a balanced budget nightmare. The White House Budget Office has consistently put out more optimistic projections than the CBO, but whichever numbers you consider, both offices agree that the days of huge "on-budget" surpluses were short lived. The CBO doesn't predict another non-Social Security surplus until 2005, while the WHBO sees slim surpluses of a mere $1 billion for the next two years.

The methods and bias of the WHBO have been called into question recently as the Bush administration has allegedly put pressure on the office to produce numbers that the President and his handlers could use to avoid the image of fiscal disaster. The Democrats do not want to appear pro-tax increase, while the Republicans have no choice but to support their leadership's decision. The tax cut's effects on the surplus can no longer be denied. Both parties are now facing the possibility of broad spending cuts in order to bring the federal budget into balance. A broad cut would have a very difficult time passing in the Democratic-controlled Senate.

The source of all of this budget wrangling can be traced to Bush's presidential campaign. During that time he was charged with committing the budget surplus to both spending programs and his administration's tax plan. Bush did little to allay these concerns, instead waiting until he was in office to offer details of his plans on how to spend the surplus. The problem of where to get the money to pay for increases in defense spending (especially national missile defense, and Bush's supposed prescription drug coverage for senior citizens) if the surplus never materialized was never considered. Unfortunately, the projected "on-budget" surpluses have decayed, leaving a budget deficit in the wake of the massive tax cut.

Not only is how to pay for this year's spending in question, but each of the next nine years promises a deficit. If the economy does not rebound and return to the unprecedented boom of the Clinton era, the projected surpluses that justified Bush's tax plan to the American people and made it affordable will never materialize. That means Congress may face a decade of budget shortfalls and spending cuts, or a rapidly increasing debt, much as it did in the 1980's under President Ronald Reagan.

Republicans and Democrats have been quick to blame each other for the demise of the surplus, but the Republicans are forced to admit that they were the ones who championed the risky tax cut proposed by Bush. Democratic cries that the tax plan put the future of the country in jeopardy have been fulfilled. Now, hopes for a short-term solution that will support the collapsing surpluses are fading as the economic outlook becomes less optimistic.

The idea of spending the Social Securty surplus is unappealing to either party in Congress or the Bush administration, but if there is no other way to fund Bush’s tax refunds and maintain viable spending levels, it may be inevitable. Robert E. Rubin, former Treasury Secretary under President Clinton, had these comments: "The economically sound thing to do is debate it [the Social Security surplus] in the context of fixing the long term. The re-establishment of a sound fiscal position was central to the good things that happened in the eight years through 2000, and it's critically important going forward."

The White House spin doctors are quick to emphasize that the current economic downturn began during the last days of the Clinton administration, but slow to consider Clinton's role in promoting the preceding eight years of unprecedented growth and prosperity. Many analysts and politicians are also taking the overly optimistic view that this last year of economic weakness is just a bump on an otherwise steady path and that after the economy recovers it will resume the path it was following prior to January of this year. That opinion is dangerous because it places too much in the hands of fate and ignores the evidence coming from Wall Street and the marketplace. There is nothing to indicate that a second period of amazing growth will follow directly on the heels of another, and so the possibility that the economy will not immediately recover is overlooked.

What few people have considered about the demise of the surplus is where it has gone. Some people have seen $300 refund checks appear in their mailboxes, while others have received nothing. The heftiest portion of Bush's tax cut went to the wealthiest 1% of tax payers, people who have no need for more money and to whom a $300 refund check is insignificant in relation to their income. The top 1% of Americans, who pay 21% of the tax revenue, will receive 43% of the benefits.

Something else to consider is that the checks sent out by the Bush administration are not 300 more dollars being returned to the tax payer, but an advance on the tax savings you may or may not receive when you file your 2001 income tax return in April of next year. The $300, or however much was sent, will be drawn from your tax refund check next year. When Bush says that the surplus is your money, he isn't lying.

Moreover, the income tax is not the tax that most affects the poor and lower-middle class. Payroll taxes affect the working poor and many blue-collar workers more than the income tax. True tax relief for workers would have been better implemented through a cut in federal withholding of payroll taxes. The Bush White House is not unaware of payroll taxes, but in fact ordered a change in how the withholdings are calculated to give themselves a little more breathing room in calculating the surplus.

The recalculation, which is the first in the history of payroll taxes, offered no relief to workers, but instead used them as pawns to support the income tax cut. One third of American workers, those with the lowest earnings, pay no income taxes. They do pay the Social Security and federal health insurance taxes, which are the two sources of federal income most responsible for the current budget surplus. The surplus was paid for with the earnings of lower-class salaried workers and they are the ones receiving no benefit from it.
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