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Perspectives on the Budget Surplus

Alan J. Auerbach and
Alan Auerbach Headshot
Alan J. Auerbach Robert D. Burch Professor of Economics and Law - Economics Department, UC-Berkeley, Director - Robert D. Burch Center for Tax Policy and Public Finance
William G. Gale
William G. Gale Senior Fellow - Economic Studies, The Arjay and Frances Fearing Miller Chair in Federal Economic Policy, Co-Director - Urban-Brookings Tax Policy Center

July 17, 2000

This paper provides alternative measures of federal budget surpluses over 10-year and long-term horizons. Official baseline budget forecasts are based on a series of statutory requirements that may be at variance with reasonable expectation. More plausible notions of current policy toward discretionary spending, taxes and retirement trust funds imply that surpluses over the next 10 years will be substantially smaller than the baseline forecasts indicate. Properly accounting for long-term imbalances in social security and the rest of the budget implies that, under plausible definitions of current policy, the federal government faces a long-term shortfall.