Opinion pieces and speeches by EPI staff and associates.

THIS PIECE APPEARED IN USA TODAY ON JANUARY 19, 1999. 

Doing the Budget Right 

For the coming Fiscal Year, the Federal government expects to take in about $70 billion more than it pays out. Without doubt, this budget surplus is real money. The question is what to do with it.

There is natural concern for future economic growth. To this end, we must keep in mind the need for productive investments that the private sector will not undertake. To get the infrastructure, education, training, and research and development the economy will need, a government role is necessary.

The best use of the budget surplus is to expand our public transportation networks, our scientific research, and our "human capital" - the skills, training, and educational achievements of our workforce. These investments will make businesses more profitable and will enable wages to grow more rapidly.

Some people doubt the reality of the surplus because it is borrowed from the Social Security Trust Fund, leading to fear for the solvency of the Fund. Instead of hiding its surpluses under a mattress, the Fund lends them to the Federal government. But if these surpluses were deposited in private banks, the banks would lend the money too.

Can the Federal government repay Social Security? The full faith and credit of the Federal governmen exceeds that of any other financial entity in the universe. That's why government bonds are the first life-boat when churning financial waters make investors seasick. Nothing is safer than U.S. Federal debt.

Borrowing to invest is elementary business practice. There is nothing wrong with the Federal government doing the same. Unwarranted hysteria over deficits and Social Security has caused the government to shrink from its responsibility as an investor in economic growth. While there are reasonable limits to this role, it remains essential.

The time to invest is when money is plentiful and interest rates are low. That time is now.

[ POSTED TO VIEWPOINTS ON FEBRUARY 22 ]

Max Sawicky is an economist with EPI. He specializes in U.S. budgetary issues.