Happy congressional Republicans quickly proposed to use more than all of the $996 billion in projected surpluses for tax cuts and favored spending programs. Specifically, the GOP's 10-year budget plan assigns 90 percent of the projected surpluses to tax cuts, 18 percent to higher defense spending than CBO projects, and suggests additional shares for highways and education. The shortfall is to be covered through sharp reductions in domestic appropriations.

Many concerns can be raised about the GOP budget proposals. Regressive and economically shortsighted are two critiques that jump to mind. But the biggest problem is more fundamental: the projected surpluses are a pipe dream.

The surpluses exist only if one starts off by assuming that over the next decade discretionary programs--everything from defense to transportation to law enforcement to environmental protection to housing assistance--will be cut by 15 percent adjusted for inflation and population growth, and by 23 percent as a share of the economy. (Under the GOP budget plan, the cuts in domestic programs would be much larger.)

Let's redo the surplus projections using some more realistic arithmetic.If, for example, we assume that defense spending will stay even with inflation and adjust domestic appropriations only for inflation and population growth, then the $996 billion projected surplus drops to only $224 billion over ten years--78 percent less than the official figure.

Alternatively and more plausibly, if defense keeps up with inflation and domestic appropriations keep up with the economy, as they have since the end of Ronald Reagan's first term, then the supposed surplus turns into a cumulative deficit of $76 billion over the next ten years.

In other words, absent giant and implausible spending cuts, there is little or no surplus.

But hold on, you might say. What about the supposed surge in future tax revenues that some insist is driving the surplus projections--and that Republicans say justifies slashing taxes. Well, actually, the tax projections are a good reality check. According to the same Congressional Budget Office report that predicts the surpluses:

• Social insurance taxes, mainly for Social Security and Medicare, will be flat over the entire 1999 to 2009 period as a share of the economy.
• All other taxes, primarily personal and corporate income taxes, are expected to fall from 13.7% of the GDP in 1999 to 13.3% in 2003, and to remain at that level through 2009.

These less than rosy revenue predictions reinforce the fact that assumed big spending cuts are the real key to the alleged surpluses.

Surplus projections based on severe and unlikely program cuts don't help us gauge the choices we face in budget policy. Even worse, they are an insidious way to imply that there are lots of extra funds available for tax cuts. There aren't.

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