TAX CUTS KEY TO FUTURE OF FEDERAL SURPLUS

One consequence of the strong economy these last few years has been the incredible gusher of tax revenue to the federal government. Over the last year, the government has turned around 30 years of deficit spending to achieve a surplus. Last month President Clinton announced a surplus to the tune of $70 billion. Over the next five years, officials have spent much of the year saying, the budget may well see surpluses totalling $1.5 trillion.

Or will it? Now the world financial turmoil is expected to cut in half the rate of U.S. economic growth to a lackluster 2 percent most of this year and next. And the stock market, having plunged from its summer highs and then gained back much of those losses, doesn't appear likely to return to double-digit percentage gains any time soon. It isn't that the budget will tumble into deficit anytime soon. But most economists say that the trend will probably be down. Many predict that next year's surplus will be smaller than this year's -- likely in the range of $50 billion to $60 billion. "I don't see how you can avoid it. A slowing economy just naturally causes revenue to decline," said economist Tim O'Neill of Harris Bank of Chicago.

Some are even more pessimistic. Mark Zandi of Regional Financial Associates in West Chester, Pa., says the principal factors that led to the surplus are gone or going. Not only have economic and market growth slowed, but a period of lower health-care inflation -- which held down Medicare spending -- appears to be ending. And military spending, which has been falling every year since 1985, will probably be increasing, as well it should, given how this administration has hollowed out our military forces. "The surplus is going to vanish almost as quickly as it appeared," said Zandi. We'll probably run surpluses in 1999 and 2000, but after that, we're going to return to the red ink."

In a $520 billion, election-year spending package adopted last month, President Clinton insisted that Congress spend $21 billion of the surplus on U.S. peacekeepers in Bosnia, aid to farmers and other programs. With his veto threat, he blocked a Republican plan to cut taxes over the next decade.

Surplus or none, it shouldn't matter. America needs a tax cut, and taxpayers shouldn't have to wait for another presidential election two years off to get action in this direction. Indeed, the very slowing economy that threatens the continuation of the surplus is itself a powerful argument for reducing tax rates on working Americans across the board.