Since 1998, the Republican Congress has committed $354 billion to debt relief. In general, the government is currently generating two surpluses and has two different methods of paying down the debt:

1) The "Off Budget Surplus" (also known as the "Social Security and Medicare Surpluses")

Social Security and Medicare currently collect more money than they pay out in benefits. Therefore, these programs produce annual surpluses. Congress has put 100% of this Social Security surplus and 100% of this Medicare surplus into "lock boxes" which prevent this money from being spent on government programs.

The money in these "lock boxes," by law, must be invested in government accounts such as U.S. Bonds. By investing this money, Congress is paying down the debt. While the government does incur some "new debt" by making these investments, this process actually has the effect of reducing the total debt because purchasing new bonds reduces the amount of old, high interest debt that the federal government holds.

For the "off budget surplus," paying down the debt means that the government invests this "lock box" money in federally guaranteed, interest bearing government bonds. These bonds represent debt held by the public. In FY 2000, this Republican Congress is locking away $149 billion of the Social Security surplus and $25 billion of the Medicare Part A surplus.

2) The "On Budget Surplus" (also known as the "real" surplus)

This surplus is, simply put, the American people's overpayment of taxes. Because the Republican Congress has slowed the rate of federal spending, the government is currently taking in more money from the people and from other sources of revenue than it spends every year. We have a plan to use $40 billion of this tax overpayment to "pay down the debt" in Fiscal Year 2000 alone.

For the "on budget surplus," paying down the debt means that the government takes the surplus money and buys back government bonds that are held by the American people. These bonds represent debt held by the public.

Buying back the public debt:

• Frees up money to be spent in the private sector of the economy
• Reduces the federal presence in the market, which opens up money to be invested elsewhere in the market or put into personal savings accounts. Reducing the supply of government bonds available, along with increasing personal savings contributes to lower interest rates.
• Further encourages borrowing and economic growth because of this reduction in interest rates.