As the orgy of media coverage subsides over President Bush's first 100 days in office, debate will focus anew on the competing tax and spending plans. Both Democrats and Republicans are basing their grand fiscal plans on estimates by the Congressional Budget Office (CBO) that the tireless U.S. economy will produce a $5.6 trillion government surplus between fiscal years 2002 and 2011.

But there's mounting evidence that these figures may be off. Just as the economic slowdown is taking its toll on corporate profits, it is already eroding projected government surpluses at the state and federal level. The CBO is projecting a $281 billion surplus for fiscal 2001 (which runs from October 2000 to October 2001), up 19 percent from a $236 billion surplus in fiscal 2000. However, the government's financial performance has been worsening instead of improving so far this fiscal year.

In March 2001, the federal government ran a $50.66 billion deficit. That's about 10 percent larger than the CBO's projection, and far larger than the $35.38 billion deficit tallied in March 2000. For the first half of fiscal 2001, the government notched a surplus of just $24.8 billion, down nearly 30 percent from the $35.24 billion surplus in last year's first half. Between March 2000 and March 2001, federal government spending rose 5.7 percent, while revenues fell 4 percent.

IMPLICATIONS OF A SLOWDOWN

For the government to achieve the goal of a $281 billion surplus for the year (the CBO is still standing by the figure), it will have to generate a $257 billion surplus in the second half of the fiscal year. That's 28 percent greater than last year's second half. Given the trend of rising unemployment and sluggish growth, it seems rather unlikely.

The federal government isn't the only body suffering financially. State governments tend to feel the pinch of economic hard times more quickly, in part because they collect sales taxes, which serve as an immediate, daily barometer of the economy's health. In sunny Arizona, income tax payments in February and March 2001 were down a shocking 21 percent from the comparable period in 2000. Earlier this year, budget officials in the Grand Canyon State were banking on a $104 million surplus for this fiscal year. Now they are planning for a deficit.

A slowdown in capital gains taxes paid may account for some of the misery. Capital gains taxes -- the taxes people pay when they book sales on things like stocks and houses -- soared in the 1990s, dumping some $416 billion into Federal coffers between 1993 and 1999. In 1991, according to the CBO, capital gains taxes brought in just $27 billion, or 6 percent of individual tax receipts. But in 1999, capital gains brought in a whopping $98 billion, and they accounted for 11 percent of all taxes paid by individuals.

Given the markets' recent performance, most observers would expect fewer rather than more capital gains taxes to be paid in fiscal 2000 and 2001 than in previous years. But not the CBO. The CBO believes capital gains brought in a record $118 billion in 2000, and should produce another record $129 billion in fiscal 2001. But those promised tax collections may prove as elusive as Amazon.com's profits.

Add it all up, and it looks like the projected $281 billion surplus for fiscal 2001 will remain just that: a projection.

ROSY PREDICTIONS

It is tempting to criticize the Bush administration for sticking so doggedly to the projections. After all, Bush has hung the centerpiece of his campaign and his presidency -- the $1.6 trillion tax cut -- on the assumption that the $5.6 trillion surplus will materialize.

But misreading the economy's performance and the collection of tax revenues is a bipartisan plague. Throughout the 1990s, as the economy grew, budget forecasters at the Clinton Office of Management and Budget continually underestimated the amount of short-term surpluses that the economy would generate.

The danger isn't just that the surplus projected for this year will fall sharply, or disappear altogether. "If we're just having a temporary slowdown, then the impact on the surplus over the next ten years may just be in the range of $200 to $300 billion," said Gene Sperling, the former chairman of Clinton's Council of Economics.

Advisors, and now a visiting scholar at the Brookings Institution. That's only a few percentage points of the $5.6 trillion projection. But, he adds, "if current trends affect long-term productivity or growth estimates even a little, that is where you could get more serious adjustments."

So as Congress and the White House haggle over whether to reduce taxes by $1.2 trillion or $1.6 trillion over 10 years, keep an eye on the monthly reports the government publishes on its revenues and expenditures. If the trends continue, we may once again learn that Washington budget estimators are the only professionals whose forecasting skills are more suspect than television weathermen.