Today the financing window for new high-tech ventures without earnings is shut. With normal rather than excessively exuberant stock markets, neither consumption nor investment can grow at their recent pace. Much has been made of the unreliability of future surplus forecasts and the imprudence of spending a surplus that may not materialize. The projections assume that the nation remains at reasonably full employment and on a sustainable growth path. But without removing at least part of this increasing drag on the economy, we are highly unlikely to realize even moderate growth in the years ahead, and it is very doubtful that surpluses of that magnitude can be achieved.
Critics worry about the crowding-out effect of a big tax cut on economic activity.
But fiscal drag suppressing the economy is the far greater danger. The worst outcome would be to squander the projected surplus by letting it evaporate through years of inadequate economic growth. That same argument is equally appropriate today.