THE UNEXPECTED EMERGENCE of federal budget surpluses during the late
1990s, combined with official projections that these surpluses will continue
for decades to come, has significantly altered fiscal policymaking.
Congressional and administration budget proposals now aim to balance the
budget exclusive of Social Security, or exclusive of Social Security and
Medicare, rather than on an overall, or unified, basis. Some proposals state
the goal of paying off the entire stock of federal debt held by the public
within a decade and a half. This fiscal bounty has also altered the likely
avenues for Social Security and Medicare reform. Traditional options
for ensuring the programs’ financial stability—benefit cuts and tax
increases—have largely given way to new options focused on using the
expected surpluses to prefund future obligations.
