These new numbers have led many in Congress to toss aside fiscal discipline and renew calls for massive tax cuts or increased spending.  House Speaker Newt Gingrich and Budget Chairman John Kasich go right to the head of the class in this contest by proposing to cut taxes by $700 billion over the next 10 years.  This money, of course, would simply come out of the surplus.

There is one significant problem with all of this euphoria– we don’t have a surplus now and we won’t really take in an extra $1.6 trillion in the next decade.  The CBO estimates do not tell the whole story.

Two things explain this inconsistency.  First, the CBO numbers do not address the already existing debt.  Over the last 30 ears, those annual deficits we have heard so much about have come to a total of $5.4 trillion.  Even if we truly could expect $1.6 trillion in surplus revenues over the next decade, that would still leave us $3.8 trillion in debt, more than twice the size of our entire yearly budget.  To analogize, we have been digging this hole for a long time, and merely stopping the digging does nothing to get us out of the hole we have created.

Second, the CBO, as well as the entire federal government, plays some interesting accounting games with the surplus generated in the Social Security Trust Fund.  Going back to the analogy, we haven’t even really stopped digging.

Since workers pay money into the SSTF now and get it back years later, the fund generates a surplus that we can’t spend now because we know we will need it later.  By law, in order to ensure the money doesn’t get lost in some questionable investment scheme, that surplus must be put into government-backed securities, meaning that the federal government borrows the money and pays interest to the fund for the right to borrow that money.  What most people don’t realize is that the CBO counts that money as income for the federal government.  The federal deficit is therefore artificially offset by the surplus in the SSTF.  

Using numbers based in reality, the budget over the next 10 years looks very different.  We will borrow $81 billion this fiscal year from the SSTF.  So that rosy scenario of a $63 billion surplus turns into an $18 billion deficit, and we keep digging that hole deeper, beyond the $5.4 trillion mark.  The $1.6 trillion in surpluses we supposedly rack up over the next 10 years, turns into only $250 billion in surpluses.  Good news– no question– we will have finally stopped digging and started heading in the right direction.  But we will also still have a debt of more than $5 trillion.

I find these dishonest manipulations of federal budget numbers deeply disturbing.  Budget numbers based in reality give rise to many important policy questions.  Is a large tax cut so important that we are willing to increase our federal debt and forgo increased investments for things like education, health care for seniors, defense and transportation?  Should we dramatically cut programs like these in order to reduce the federal debt and cover the cost of a large tax cut?  Should we hold the line on both increased spending and tax cuts until we reduce the debt?

It is unfortunate that so many in Washington, D.C., are willing to be dishonest with the federal budget numbers to score election-year points.  I too would love to promise everyone a sizeable tax cut and increased investments in health care, education and transportation.  But to do so without honestly assessing the trade-offs is at best misleading and at worst deceitful.

Like the snake oil salesman of the old West riding into town and promising to solve all of a person’s ills for only 75 cents a bottle, too many elected officials promise big spending increases and huge tax cuts, all paid for the that magic elixir, our coming budget surplus.

A surplus that doesn’t exist.