With the economy faltering before the September 11 attacks and now approaching recession, taxpayers must be wondering what happened to the budget surplus we were hearing about.

Recent estimates show that the ten year projected surplus has shrunk by $3 trillion down to $2 trillion, but even that number is not concrete. If the Social Security Trust Fund is not included, Congress and the president have said they would set it aside, the surplus becomes a $400 billion deficit.

The deficit could become larger because these most recent estimates do not take into account costs from legislation that likely will be passed such as a Medicare prescription drug benefit or the farm bill or spending to respond to natural disasters.

Even with more spending projects coming in the future, evidence points to declining expenditures. In fact expenditures are at lower levels than in the 1980s and 1990s and may soon reach levels not seen since the mid-1960s.

The problem is that revenues are projected to decline at a faster rate than expenditures. Even though there will not be as many expenditures the government will have less money to pay for them.

The lost surplus can be attributed to three different areas. Half of the shrinkage in the surplus was due to the president’s tax cut. A quarter of the shrinkage came as a result of the slowing economy and the other quarter came from increases in existing programs and legislation responding to the terrorist attacks.

In the long run the tax cut is the biggest culprit because by 2010 it will be responsible for more than 67 percent of the disappearing surplus. The short-term offender is the economic downturn that was magnified by the terrorist attacks.

The passage of an economic stimulus package will go a long way to evaporating the surplus. The president asked for a package that cost $60-$75 billion over ten years but a package that reaches his desk could cost upwards of $100 billion. Interest payments could increase the cost by about $50 billion.

The money given to New York City along with the airline bailout and other new legislation passed after September 11 was not planned for. That is money spent in addition to the spending planned for by Congress and the Administration in the 13 appropriations bills.

America is on the brink of recession if not already in one. We will almost certainly be in a period of deficit spending in the future. The quickly vanishing surplus will probably fall below the projected $2 billion. It is imperative that our elected officials show restraint in the budget process and that pork does not play a role in new spending measures.