Last week, the Congressional Budget Office (CBO) projected an even larger federal budget surplus over the coming decade.  Now estimates point to a total 10-year surplus of $4.5 trillion, including a non-payroll tax surplus of $2.2 trillion.

Quite frankly, the CBO's assumptions of 3.1% real GDP growth in 2001, and an average of 2.7% from 2002 to 2010, are very conservative.  After all, the post-World War II annual real GDP growth rate has averaged about 3.4%, including recessions.

What does this all mean?  Either we have a historic opportunity for pro-growth, pro-entrepreneur tax relief, or we are staring into the abyss of previously unimagined and frightening levels of government spending.

What to do?

As we have called for previously, let's start by killing the anti-growth, anti-entrepreneur death and capital gains taxes.  At this point, eliminating both levies would barely make a dent in these budget surplus projections. 

Just as important, let's shift both the personal and corporate income taxes to two-rate systems, with a bottom rate of 10% and a top rate of 25%.

Without such sagacious tax reduction, the threat of massive and destructive growth in the federal government will become reality.

Raymond J. Keating
Chief Economist
Small Business Survival Committee
and co-author of
U.S. by the Numbers:
Figuring What's Left, Right, and Wrong with America State by State