NCPA - National Center for Policy Analysis


May 8, 1997

The Congressional Budget Office's last-minute projection that the federal budget deficit would be $225 billion smaller over the next five years led to the recent budget compromise. The deal has all Washington rejoicing in a frenzy of self-congratulation, but it may be the worst news yet for advocates of smaller government. Analysts worry the windfall postponed the necessity of containing entitlement spending, and the nation will again be choking on deficits.

  • While under the compromise federal outlays would be reduced by about $250 billion over five years, that is only 3 percent of federal spending -- smaller, in real terms, than several past deficit-reduction packages.
  • Two months ago, the CBO forecast that the budget deficit would equal 2 percent of GDP by 2002.
  • It said, however, that Social Security, Medicare and Medicaid outlays would total 10.3 percent of GDP by 2007 and the deficit would creep up to 3 percent of GDP by then.
  • By 2020, the big entitlements will be consuming 14 percent of GDP and the deficit will swell to 7 percent of GDP.

Those around in 2050 will face a deficit of 18 percent of GDP and federal spending will be almost twice as large as revenues.

Budget analysts say that all that is left of the assault on entitlements is a one-time cut in the federal bill for medical services, virtually all of which will come from providers.

So that $225 billion windfall is beginning to look a lot like a certain gift horse sent by the Trojans.

Source: Petter Passell, "The Budget Deficit Problem Will Be Back, With a Vengeance," New York Times, May 8, 1997.


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