Economy, Not Budget Plan, Shrinking Deficit
November 1, 1997
In March 1997 the Congressional Budget Office projected a deficit of $115 billion for fiscal year 1997; but the actual deficit was only $23 billion. Unexpectedly strong economic growth and technical reestimations account for fully $90 billion of the $92 billion reduction from the projection, says a budget analysis from the Concord Coalition.
- By contrast, the budget plan passed last summer actually increases the 1998 deficit by $21 billion above what it would have been.
- The increase is caused by a $12 billion increase in spending -- $11 billion of which is in the domestic discretionary area -- and a $9 billion decrease in revenues.
- The strong economy and technical adjustments are responsible for 81 percent of the drop in projected deficits from 1998 to 2002, while policy changes in the budget reconciliation account for only 19 percent.
- Of the $118 billion in net policy savings over five years, $116 billion is supposed to come in the final two years, with $95 billion of that total in the very last year.
If revenues or spending do not meet their targets, warns the Concord Coalition, the plan contains only modest enforcement provisions. If the budget is balanced in 2002 and kept in balance through 2007, it will save a projected $595 billion of accumulated debt over the next decade. However, in 2002 baby boomers will start retiring, and as the Social Security funds' surpluses shrink, the deficit and debt situation will rapidly deteriorate.
Source: "The Bipartisan Budget Deal: Good for America?" Concord Coalition's Quarterly Deficit Report, November 1997.
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