WASHINGTON – The Bush administration said Monday that the 2001 budget surplus is slimmer than the beefy one the year 2000 yielded because of the sagging economy and the broad-scale tax cut plan.
But in spite of the hit to the government's wallet, the $127 billion surplus for the 2001 budget year is the second-largest in United States history. Federal finances haven't seen as many consecutive years of surplus since before the Great Depression, when an 11-year stretch of excess funds ended in 1930.
Budget analysts had already lowered surplus projections for 2001 as the economy — which has weakened steadily for more than a year — continued to slump.
The Congressional Budget Office earlier this month estimated that the 2001 surplus would be $121 billion, well below the $153 billion projected in August. The White House said it could be as low as $120 billion, versus an August estimate of $158 billion.
The CBO said the surplus for the 2001 budget year, which ended Sept. 30, reflects the declining economy's toll on tax revenues and the impact of President Bush's $1.35 trillion, 10-year tax cut plan, approved by Congress in the spring. The tax cut resulted in about $35 billion in rebate checks over the summer, according to the CBO.
The tax law also shifted the due date for corporate income tax payments — estimated to total around $33 billion — from mid-September to Oct. 1, the state of the new fiscal year, so that income will be reflected on next year's books.
The Sept. 11 attacks on the World Trade Center and the Pentagon also contributed to the smaller 2001 surplus as government spending in some areas was increased after the disaster. But the impact was limited since the budget year ended Sept. 30.
Some economists believe the government will post a deficit in the 2002 budget year, the first shortfall since 1997, reflecting costs of reviving the ailing economy and protecting the nation against terrorist attacks.
In August, experts projected a $176 billion surplus for the new fiscal year that started Oct. 1, but now it is all but certain to end up as a deficit in the tens of billions.
Many economists say economic fallout from the attacks pushed the economy into recession this calendar year. Analysts predict economic output fell in the third and fourth quarters, meeting one common definition of a recession.
In the 2000 budget year, the government posted a record surplus of $237 billion as the economic boom bolstered tax revenues. That surplus surpassed the previous record of $124.4 billion for fiscal year 1999 and came on top of a $69.2 billion surplus in fiscal year 1998. The 1998 surplus marked the first time the government had managed to finish in the black since 1969.
The surpluses are important because politicians have been counting on them to reduce the national debt over the next decade. That would put the government on more solid financial ground and help bolster Social Security and Medicare for the looming retirement of the baby boom generation.
Revenues for fiscal year 2001 totaled $1.99 trillion, while expenditures came to $1.86 trillion.
Individual tax payment totaled $994.3 billion, compared with $1 trillion in fiscal year 2000. Payments from corporate taxes came to $151.2 billion, from $207.3 billion.
The biggest spending categories in fiscal 2001 were:
• Social Security, $461.7 billion, up from $441.8 billion;
• programs of the Health and Human Services Department, including Medicare and Medicaid, $426.4 billion, up from $382.6 billion;
• interest on the public debt, $359.5 billion, compared with $362 billion; and
• military spending, $291 billion, up from $281.2 billion.
The Associated Press contributed to this report.