Magazine article The American Enterprise

Deficit Debate

Magazine article The American Enterprise

Deficit Debate

Article excerpt

Alice Rivlin and Isabel Sawhill, "Growing Deficits and Why They Matter," in Restoring Fiscal Sanity: How to Balance the Budget, Brookings Institution, January 2004 (brookings.org)

For most of the twentieth century, America has run budget deficits. Except for some brief periods during the economic booms of the 1920s, '50s, '60s, and '90s, the American government spent more money than it took in. Under Bill Clinton, a combination of tax increases, modest spending growth, and robust economic growth resulted in the most recent run of surpluses. Under George W. Bush, slower economic growth, coupled with tax cuts and increased spending on defense, homeland security, and education, has resulted in deficits that are the largest in history in dollar terms, but quite modest in comparison to the size of the economy.

Alice Rivlin, who held a variety of important positions in the Congressional Budget Office (CBO), the Clinton administration, and the Federal Reserve, and Isabel Sawhill, a think-tank economist, believe that the current deficits result from "trying to have it all: lower taxes and increased spending--for Social Security, Medicare, defense, homeland security, and many other programs."

Rivlin and Sawhill take a critical look at the official ten-year deficit projections from the CBO. These projections, they show, make a variety of rather dubious assumptions (like the expiration of tax provisions that Congress is almost certain to extend). …

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