The Congressional Budget Office recently estimated that the
federal budget deficit for fiscal year 2007 will be about $158
billion, $90 billion less than last year. At that rate, we might
well have a budget surplus within two years. Of course, that
depends on many different factors, including the extent to which
Congress and the President control spending and whether the economy
continues to grow. Since a surplus seems likely, conservatives
should be prepared for it. In that spirit, let me propose what I
call “Balanced Budget Conservatism.”
Balanced Budget Conservatism starts with the premise that any
surplus should first be used to create personal savings that will
be used to stave off the coming entitlement crisis. When the
surplus returns, many conservatives will have a noble desire to use
the surplus to cut taxes. (And by “tax cuts” I do not mean extend
the Bush tax cuts. Those should be extended regardless. By tax cuts
I mean going beyond the Bush tax cuts.) And, surely, a good
argument can be made for that course of action. But a better case
can be made for using the surplus to create personal savings.
If we use the surplus for tax cuts, those tax cuts could easily
prove ephemeral. We might have to give them back at a future point
in order to pay for the coming shortfalls in Social Security and
Medicare. Thus, to preserve the tax cuts we have now, we should use
any surplus to save for the coming entitlement crisis.
Politicians and pundits should emphasize that the surplus
belongs to the American people, and the best way to ensure that
they have it is by using the surplus to create personal accounts.
The surplus should be used to create two personal accounts for
every working American under age 55, one for Social Security and
one for Medicare. Money would only go into the accounts as long as
the government was running a surplus. Individuals would have the
choice of different index funds in which to invest these
accounts.
If this is sounding a lot like Bush’s abortive attempt at Social
Security reform in 2005, you are right. But there are some key
differences this time. First, it will not require any “carve out”
from the current payroll tax to create the accounts. Second, we do
not have to discuss any future benefit adjustments at this point,
such as moving from wage indexing to price indexing for Social
Security benefits. Indeed, conservatives should avoid any
discussion of benefit cuts for the time being. They should only
emphasize that the personal accounts are to empower the American
people, their children, and their grandchildren to create savings
that will protect them against the coming entitlement crisis.
Finally, using a budget surplus avoids deficit funding of the
accounts.
Using the surplus to create accounts will have the added benefit
of putting downward pressure on spending. If spending takes off, it
will eat up the surplus resulting in no money for personal
accounts. It will be easy for conservatives to criticize more
liberal politicians for spending money that should be going into
people’s individual accounts. Unless politicians want to face the
wrath of voters who are no longer seeing funds going into their
accounts, they will be far more hesitant to increase spending
beyond reasonable levels.
In order to sell Balance Budget Conservatism to the public,
politicians and pundits on the right must emphasize that the
accounts create ownership, personal property and savings for
individuals. For the time being, they should avoid talking about
benefit cuts. That is a discussion for a future date, one that will
be made much easier when individuals have accumulated savings to
rely on.
If and when surpluses return, conservatives need to be ready
with a game plan. Balanced Budget Conservatism provides us with
one.
*****
Final Note: This is my last column in The
American Spectator for the foreseeable future. I am taking a
job on Capitol Hill, working on many policy issues including health
care. With health care policy likely to be a major issue for the
next two years, a chance to work on the inside of the policy
process is an opportunity I cannot pass up. It’s been a great run,
and I am forever appreciative of the editors at the
Spectator for taking a chance on me five years ago. I have
also enjoyed the camaraderie with my fellow Spectator
writers. And, finally, thanks to all the readers who have ever
taken time out of their day to read one of my columns. I’ll miss
you all.
