No one thinks it's easy to project changes in the nation's growth far in advance. But there are economists who believe the CBO was slow to notice the sputtering economy, and herald this year's numbers as a correction of sorts.
"I think they're finally getting a little realistic," says Steve Cochran of Economy.com in West Chester, Pa. "They never accounted for any recession in the outlook until recently … What the CBO has done really reflects the current economic situation."
Of course, with the typical postwar U.S. recession lasting from 12 to 16 months, most economists are already anticipating an economic recovery later this year — although it's anyone's statistic-studded guess when and how sharp the recovery will be. The CBO seems to be on the optimistic side of this debate, too; Director Dan L. Crippen told Congress last week that "the most likely path for the economy is a mild recession that may already have reached its nadir."
All told, the CBO projects 2.5 percent growth in 2002 and a 4.3 percent gain in 2003 — a slightly stronger recovery than Cochran, for one, is willing to project. But others are more accepting of the CBO's figures. Richard Kogan of the Center on Budget and Policy Priorities in Washington says the "more flexible economy" of the current day means "this sort of bounce-back is not atypical after recession."
And in congressional testimony on Thursday, Federal Reserve Chairman Alan Greenspan essentially endorsed the CBO's view, implying the office was right to be "reasonably sanguine about the economy's growth prospects for the next 10 years."
Tax Cut a Bigger Chunk of Change
But if the forecasting ability of the CBO is an important variable in the surplus debate, the current report makes something else clear, as well: The economic slowdown accounts for but a relatively small portion of the missing $4 trillion.
According to the CBO forecast, the tax cut constitutes about 40 percent of the difference — nearly twice as much as the economic downturn, which accounts for slightly more than 20 percent of the disappearing money. Spending increases, including post-Sept. 11 security measures, are nearly 20 percent; and bookkeeping changes, like larger interest payments on the national debt, are about as large.
And since most of Bush's tax cut is scheduled to take place in the last five years of the 10-year period, some would argue the state of the economy, while the main reason for the dwindling surplus over the last 12 months, will soon become a less significant budget issue than the tax cut.
"It really isn't a matter of opinion, it's right there in the CBO numbers," says Robert Greenstein, executive director of the Center on Budget and Policy Priorities. "The economy is the single largest factor behind the shrinkage of the surplus in the short term, and the tax cut is the single largest factor behind the shrinkage of the surplus over the long term."
With that in mind, Democrats have been trying to rein in the tax cut, hoping to connect with a public that appears to strongly support fiscal discipline. An ABCNEWS.com poll released this month shows 52 percent of Americans would scrap the remainder of the Bush tax cut "if doing so helped to avoid a deficit in the federal budget," while 32 percent oppose doing so.
Bush, in response, has accused the Democrats of wanting to raise taxes, and is vowing to keep the whole tax cut intact. All of which means the budget battle will create plenty of fireworks in the future — no matter what the CBO says about the economy.