NCPA - National Center for Policy Analysis

Budget Deficit Lowest Since 1970s

October 27, 1997

The federal budget deficit for the fiscal year that ended on September 30 was $22.6 billion, according to administration sources. In dollar terms, the deficit has not been so low since 1974, when it was $6.1 billion.

  • The Clinton administration had started the year expecting a deficit of $128 billion -- a figure which it and the Congressional Budget Office scaled back to $34 billion to $36 billion as recently as late this summer.
  • As a percentage of the nation's economic output, the deficit now stands at less than 0.3 percent -- equaling or slightly lower than 1970, the year after the last budget surplus.
  • Economists report that the deficit is far below that of any other big industrialized nation, and is one reason the U.S. has enjoyed a combination of steady growth, low inflation, low unemployment and heavy business investment in new technology.

Republicans in Congress are reportedly looking forward to the deficit being wiped out well in advance of 2002, and are debating how best to handle any surpluses. Options include paying down the national debt, instituting annual tax cuts -- or increased government spending. Economists and budget analysts, however, caution that the deficit could increase again next year and are far from certain that it will be in balance in 2002.

They attribute some of the deficit reduction of the last several years to an economy that grew faster than expected, but also to the tax increases of 1990 and 1993, both of which dramatically increased federal revenues.

Some economists point out that the government's accounting practices allow it to include surpluses of Social Security tax revenues over outlays in its deficit calculations. In 1996, those amounted to $66 billion. This factor throws into question just how close to balance the budget really is.

The deficit peaked, in dollar terms, at $290.4 billion in 1992.

Source: Richard W. Stevenson, "Federal Deficit at Lowest Point in Two Decades," New York Times, October 27, 1997.

 

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