(CNSNews.com) - A noted economist is debunking claims that President Bush's tax cut is to blame for a lower-than-first-projected budget surplus. Those claims are "nonsense," said Dan Mitchell, a Heritage Foundation economist. He said the budget surpluses of recent years are like "blood in the water with hungry sharks," the hungry sharks being congressional Democrats who have tried to increase government spending.
Mitchell's comments come a day after the White House projected that the fiscal 2001 budget surplus would be about $158 billion -- far less than the $281 billion projected in April, but still the second largest budget surplus in history. However, excluding the Social Security surplus, $1 billion remains. That means politicians must limit spending, President Bush has argued.
The reduction in the budget surplus estimate can be blamed on a number of factors, including a sluggish economy, which has resulted in decreased tax revenues for the last year; and on a $9 billion increase in spending by Congress. Far from blaming tax cuts, President Bush said those cuts will help stimulate the economy, which would boost future surpluses.
Democrats pounced on news of "the incredible shrinking budget deficit" on Wednesday, using newspapers across the country to accuse the White House of "cooking the books" and using "overly optimistic economic forecasts and accounting gimmicks" to pass the $1.35 trillion tax cut.
In an interview with the Washington Post Thursday, Senate Budget Committee chairman Kent Conrad (D-N.D.) called the administration's prior forecast a "fiscal mismanagement big time." Democrats also say they fear if anymore of the surplus disappears, Social Security reserves will be tapped.
However, Mitchell said those theories were wrong, and the government is still in better financial shape than it ever has been.
"We have a $158 billion surplus for [Office of Management and Budget] and on August 28, we expect similar numbers from the Congressional Budget Office," said Mitchell. "It will be the second largest budget surplus in U.S. history, so this 'Chicken Little, sky is falling,' [attitude] that we are at the end of fiscal good times that we are getting from Capitol Hill is just non-sensible."
Mitchell went on to debunk the theory that since $157 billion of $158 billion surplus is the Social Security trust fund, Social Security will be tapped to cover the tax cut and increased spending, saying that whatever is taken from the trust fund, by law must be replenished with government bonds.
"To say that if we lose more than $1 billion, we will be tapping into Social Security...is nonsense," Mitchell said. " No matter what you do with the Social Security surplus, by law, it all gets turned into IOUs and put in a trust fund.
"So, you can spend the surplus on good programs or bad programs, you can cut taxes, or pay debt, or put it in a big pile on the Treasury Dept's lawn and burn it...it doesn't matter," he said.
Mitchell added that if the surplus is not spent on worthwhile causes, it will be squandered by big spenders on Capitol Hill.
"The [current] fiscal policy situation is that we will have a $3.1 trillion of surplus over the next ten years, and it is imperative to use that wisely, for tax relief, Social Security reform, and national defense," he said. "If it is not used for those things, it will be used for more pork barrel spending."