NCPA - National Center for Policy Analysis

Factors Which Lowered The Budget Deficit

August 8, 1997

A variety of factors contributed to falling deficits in recent years -- including the $200 billion windfall in tax revenues which led to the projected $37 billion budget deficit this year.

Three factors explain 40 percent of the drop in the deficit from 1992 to 1996, according to Cato Institute economist Stephen Moore.

  • The end of the Cold War allowed a $35 billion savings in military spending since President Clinton took office.
  • The wind up of the savings and loan bailout cut spending, while the sale of defunct banks' assets brought $15 billion to the Treasury last year.
  • Revenue was gained from sales of the communications spectrum.

Some analysts attribute this year's windfall in revenues to a steep jump in taxes paid by individuals -- funds not withheld last year because they were unexpected. The booming stock market put the money into investors pockets last year, and a considerable portion of those profits arrived at the Treasury Department up until April 15.

Source: Perspective, "Deficit Deceit," Investor's Business Daily, August 8, 1997

 

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