Congressional Budget Office projects higher 2000 budget surplus

May 12, 2000
Web posted at: 4:01 p.m. EDT (2001 GMT)

WASHINGTON (CNN) -- The Congressional Budget Office said Friday that the projected U.S. budget surplus will exceed $200 billion for this fiscal year, up from its previous estimate of $179 billion.

The CBO, the nonpartisan budget analysis arm of Congress, also said that the portion of the surplus excluding Social Security reserves should top $40 billion, up from its previous $26 billion estimate for fiscal 2000, which ends September 30.

Higher budget surplus projections will likely ignite an already hot election year debate over whether to use the money for tax cuts or government spending.

Leaders of both parties have vowed not to use surplus funds from the Social Security trust fund, which leaves the estimated $40 billion for the fight over how to spend it.

The new figures could be good news for Texas Gov. George W. Bush, the likely Republican presidential nominee, who has agreed that there is enough of a federal surplus to pay for his five-year, $483 billion tax cut as well as spending proposals on education, health-care, housing and the environment.

However, the CBO cautioned in its monthly report that it remains unclear whether there would a long-term surplus improvement because of economic uncertainty.

"Stronger economic growth is likely to continue through much of the rest of this year," the CBO report said. "Beyond 2000, however, the outlook for economic growth will reflect a number of factors, such as tightening monetary policy, whose effects are not yet clear.

The latest CBO budget projection is the first to include revenues from this year's federal tax returns.

Tax returns in April and early May "were unexpectedly strong," the agency said, with the booming economy boosting receipts almost 11 percent higher this April than a year ago.

The extra money projections may also benefit President Bill Clinton's efforts to persuade the Republican-controlled Congress to release an additional $30 billion in domestic spending for the fiscal year 2001 budget.

Republicans and Democrats have agreed that Social Security reserves should be used solely to pay down debt until they are needed for retiring baby boomers, and should be put off-limits in the budget battle over tax cuts versus spending.

"It's a big political deal, but not a big deal for the economy," Stanley Collender, of the Fleishman-Hillard consulting firm, said of the CBO projection. The projected change of at least $20 billion is "virtually a rounding error" in the $1.8 trillion federal budget, he said.

CNN's Dana Bash and Reuters contributed to this report.