Earlier this week, President Clinton declared that the Administration was raising its estimated federal budget surplus for FY1999 to at least $115 billion. Such an announcement may be a political home run-with most people apparently dreading budget deficits and lauding budget surpluses-but in terms of the economics, it's a strike out.

There are several problems with today's budget surplus:

A mounting budget surplus means that government is taking more from the private sector than it should. Since government is far less efficient than private businesses who must answer to consumers, that's bad news for the economy.

As evidenced by recent budget shenanigans, surpluses give politicians more money to spend on new and expanded government programs.

Today's budget surplus came about not due to government spending cuts, but through rising revenues. For example, from FY1990 to FY1999, federal outlays increased by about 40%, while federal revenues grew by roughly 80%. Meanwhile, over the same period, consumer prices rose by about 11%.
Rather than draining valuable resources from the private sector, only to waste them on a wide array of federal government schemes, the White House and Congress need to take this unprecedented opportunity to re-focus their work. They should be centered on at least limiting the growth of the federal government to the rate of inflation; cutting taxes deeply to spur investment, entrepreneurship, jobs and prosperity; and allowing the federal debt to decline naturally. That makes the most economic sense.