Word: surplus
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...most basic level, the surplus matters because anyone who has ever tried to run a household or a small business understands the core issue: being disciplined enough to keep spending in line with income. "I run a business on a budget," says Jay Fox, 42, executive director of the Arkansas State Golf Association. "If our surplus was disappearing, it would be of concern...
Bush aides insist the surplus shrank mainly because of the slowing economy--a weakness the Office of Management and Budget, in a report last week, was careful to trace to the stock-market slide that started in March 2000. (Translation: Bill Clinton did it.) In truth, the lack of $46 billion of the missing $123 billion is attributable to lower general tax revenues because of the slowdown. "It's remarkable we have a surplus at all, given the yearlong slowdown," argues OMB director Mitch Daniels. The rest of the shortfall can be traced to Bush's military pay raise...
...those tax-rebate checks. "This was a perfectly timed tax cut," says Larry Lindsey, director of the President's National Economic Council, that "stopped a very precipitous fall." As the rebate stimulates consumer spending, he argues, it will increase the government's tax haul. The upshot: the surplus should come roaring back...
...budget-surplus battle is more about politics than economics. In a $10 trillion economy, it doesn't much matter if the government has to dip into Social Security for a few spare billion. But with both parties committed to a lockbox, budget makers are forced to look for savings in less sacrosanct areas, which means that, depending on where the budget ax lands, you may be about to lose a popular program...
...lost surplus may also be hurting the economy--and hitting Americans in the wallet. Despite Federal Reserve Board Chairman Alan Greenspan's seven short-term interest-rate cuts, long-term rates--the ones that govern home mortgages--have hardly budged. The reason: those rates are set not by the Fed but by bond traders, many of whom are clearly spooked by economic uncertainty and anticipate more government borrowing in the future. Mortgage rates, though fairly low, could be lower--and if they were, even more Americans would be refinancing their mortgages and getting back hundreds of dollars a month...