Tax cuts of the magnitude President Bush has proposed are gaining momentum in Washington due to two recent events. First, the Congressional Budget Office has increased its estimates for budget surpluses for the next decade by $400 billion to $5.6 trillion, and with so much extra money promised it seems just plain stingy for the government not to give some of it back to the people who earned it. Tax cut proponents received a second boost when Federal Reserve Chairman Greenspan came out in favor of tax reduction. It is unlikely that many politicians will be eager to quibble with the Fed Chairman, who arguably has been responsible in large part for the tremendous economic boom of the past decade.

But before we let our government rush forward to spend away budget surpluses on tax cuts, we should examine more closely both the CBO's projections and Chairman Greenspan's remarks.

While the CBO's short-term projections are rosy, its longer-term projections are not. Surpluses are expected to last for about twenty years, but thereafter, they will again be replaced by deficits, with the federal debt reaching an astronomical $32 trillion by 2040.

And, when Greenspan spoke of tax cuts, he was proposing them only as a way to deal with the current, short-term situation of larger than expected surpluses.

The question is, then, what is the best solution over the longer haul?

When the government runs deficits, it issues Treasury Department debt instruments -- T-bonds, T-bills and the like -- which it sells to the public, using the proceeds to pay for government programs. These outstanding Treasuries are what constitute the national debt.

Now that the government is running surpluses instead of deficits, it is using the excess dollars to repurchase Treasuries, thereby paying off its debt. Due to strong economic growth, the surpluses have grown to beyond our wildest expectations, and it now appears that by 2006 there will be no debt left to buy back.

After its buyback of debt is complete, the government must find something else to do with its surplus dollars. Some propose it could begin purchasing nonfederal assets. That is, the government could use the surplus to buy corporate stocks and bonds -- a highly troubling proposition that Greenspan has steadfastly stood against since it would be too difficult to insulate investment decisions from political calculations.

The Bush Administration and others propose one obvious solution, which would be to enact sweeping tax cuts, returning the surpluses to taxpayers, thereby avoiding the problems of government investment in private assets. But this remedy neglects two fundamental realities of our economy.

First, the nation has another big economic problem to remedy: contending with negative personal savings rates. Savings comprise the engine that fuels economic growth, and low levels will sooner or later choke off new investment. Paying down the debt is has been a great way to increase national savings. These proposed tax cuts -- which would in large part be spent, judging from individuals' demonstrated preference for consumption over savings -- do not provide the same long-term benefits.

Secondly, we know that, according to projections, not long after the debt is to be eliminated, the country will be hit with the tremendous expense of funding the baby boom's retirement and health care expenses through entitlement programs. To prepare for these costs, we need policies that increase savings to build up reserves for these tremendous expenses.

The best way to preserve the economic benefits of lower government debt, while dealing with the dilemmas large surpluses present, would be to combine more modest debt reductions with a return of part of the surpluses to the public -- but in the form of savings rather than unrestricted tax cuts.

Such a plan could take a variety of forms. The government would continue to reduce the debt, albeit more slowly, stopping short of paying it off. The remainder of the surplus could be saved by individuals rather than the government, either in retirement accounts as part of Social Security or in dedicated savings accounts for education, home ownership or health care.

Alternatively, surplus dollars could be used to start KidSave, a plan to endow all newborn children with savings to help pay for their future education and retirement needs. Or, finally, surplus money could be used as an incentive to help low-income workers save and become part of the asset-owning class by providing progressive matches to augment what they save on their own.

The key component of a plan of the type I am proposing would be that the surplus dollars would be used to create new savings -- not merely to replace the savings already out there, saved and in private hands. Under this kind of savings-focused budget plan, similar benefits to those that would be realized from paying down the debt would be achieved. And the benefits would last into the future.

Fiscal discipline now looks very different than it did a few years ago. We no longer have to consider raising taxes to get our fiscal house in order. But as we consider lowering them, particularly in place of paying off the debt, it would be beneficial to do so in a way that generated the same benefits as debt reduction -- most importantly, increasing savings to fuel the economy.

Mr. Greenspan ended his recent remarks on the cautionary note that "With today's euphoria surrounding the surpluses, it is not difficult to imagine the hard-earned fiscal restraint developed in recent years rapidly dissipating." Though we are likely to determine that some debt is necessary to avert accumulation of private assets by the government, it is still possible to avoid squandering the historic opportunity the surplus represents, by ensuring that the surplus dollars are saved -- only privately, rather than by the government.

Maya MacGuineas is a Fellow at the New America Foundation, a non-partisan think tank in Washington DC. She has served as an adviser on Social Security issues to the McCain presidential campaign and to the Brookings Institution, and her work has been published in the Washington Post and the Los Angeles Times.