Bartlett: Higher Revenues Balance Budget
January 19, 1998
The latest Congressional Budget Office (CBO) forecast now shows the federal budget to be in effective balance, with a projected deficit of just $5 billion this year. This represents an improvement of more than $50 billion just since September, when CBO issued its last deficit estimate (see figure).
More than 100 percent of the decline in the deficit had nothing to do with anything Congress or the White House did.
- Last March CBO estimated a deficit of $122 billion for fiscal year 1998.
- The effect of all the legislation passed last year, including the Balanced Budget Act of 1997, was actually to increase the deficit by $20 billion.
- Technical factors unrelated to changes in legislation lowered the deficit by $73 billion, while faster than expected economic growth reduced it by $65 billion.
Without the contribution of economic and technical factors we would continue to run deficits in the $150 billion per year range for as far as the eye can see.
Virtually all of the economic and technical adjustments involve higher federal revenues.
According to CBO, federal receipts will hit 19.9 percent of GDP this year, up from 17.7 percent in 1992. Spending is expected to consume 20 percent of GDP, compared to 22.5 percent in 1992. Thus the deficit has fallen almost equally as the result of higher taxes and lower spending. In 1969, the last year in which the budget was balanced, revenues took 19.7 percent of GDP, while spending amounted to 19.4 percent.
Source: Bruce Bartlett (senior fellow, National Center for Policy Analysis), January 19, 1998.
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