Tax Guru-Ker$tetter Letter
Monday, August 20, 2001
Budget Surplus Misconceptions
Little Dick Gephardt and his fellow traveler socialists in D.C. are trying to call any tax cut irresponsible because the one recently passed has supposedly hurt the size of the budget surplus. Rush Limbaugh devoted most of his show to this topic today. I'm a big fan of Rush's; but while he made some good points about the fact that the tax rebates are supposed to reduce the surplus, he missed the big picture. He, and everyone else, have fallen into the trap of discussing the budget surplus as if the numbers are real.
This was just another Clinton time bomb. The surplus never really existed. All of the projections were literally pulled out of thin air, based on the underlying assumption that the stock market & resulting capital gains taxes would increase every year at the same rate as in 1999, which was an unusual bonanza year for the IRS. Clinton tipped his hand several times when every few months he would announce that they had magically discovered another trillion dollars of future surplus. It was a bunch of crap then and it is now. Unfortunately, nobody in power will admit this fact because that would reduce their power, which is all based on how much money they redistribute.
I have known Fed budget people for years and they have never once been anywhere close to accurate in their predictions of future budgets. They are no better than the weatherman. Budget estimates of 12 months out are never accurate; which makes any of these ten year predictions competely insane. If the Federal number crunchers are able to somehow get within $50 billion of their projections, they consider it a bulls-eye. They rarely hit closer than $100 billion. Their use of those future surplus numbers as gospel is as valid as if I were to project winning the lottery every month and spend accordingly. As with almost everything else, the mass media are completely incompetent when discussing this topic and are not to be trusted.