Newspaper article The Christian Science Monitor

Economists Forecast Happier Fiscal Year

Newspaper article The Christian Science Monitor

Economists Forecast Happier Fiscal Year

Article excerpt

HAPPY fiscal new year.

In the United States, the federal government starts a fresh budget year today with much cheerier prospects than anybody would have thought likely last fall. With the budget likely in surplus in September, the fiscal 1993 deficit should have run about $260 billion, says Stanley Collender, budget expert for Price Waterhouse. That's $30 billion less than the fiscal 1992 deficit and an even greater improvement from the $327 billion deficit projected by President Bush last January or the $322 billion reckoned by President Clinton a few months later.

For 11 months through August, the deficit totaled $263 billion, down from $296 billion for the same months in fiscal 1992.

The budget situation "looks a lot better," says David Wyss, an economist with DRI/McGraw-Hill, an economic consulting firm in Lexington, Mass. "It has given {the Clinton administration} a head start on controlling the level of the deficit. It doesn't solve the problem for them. But it makes it more manageable."

Mr. Collender expects the administration and Congress to tackle deficit reduction again in October, making perhaps another $6 billion to $8 billion cut in the budget per year for five years.

"Most of the news on the budget is good - not bad," Collender says, with some astonishment.

He also anticipates passage by Congress of a balanced-budget amendment to the constitution. Since this would need ratification by 38 states, he doesn't expect any real impact until perhaps 2003 or even later. But for Democratic congressmen, a vote for the amendment could, as Collender notes, "make them look holy on the deficit."

Several factors account for the lowered deficit:

* Interest rates have tumbled far lower than most economists, including those drafting the budgets, anticipated. A 30-year Treasury bond offers a 6 percent interest rate today, down from 7.75 percent at election time last year. With some $3.3 trillion of federal debt held by the public, a 1 percent drop in average interest costs means a $33 billion saving for Uncle Sam.

The Revenue Reconciliation Act of 1993, with its hike in taxes for the well-to-do this year, hasn't had much direct impact on revenues so far. …

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