Newspaper article The Christian Science Monitor

Deficit. What Deficit? Some Experts No Longer See Red When Talk Turns to the Budget

Newspaper article The Christian Science Monitor

Deficit. What Deficit? Some Experts No Longer See Red When Talk Turns to the Budget

Article excerpt

The US federal government is already running in the black.

By one measure, at least, the federal budget deficit has already vanished, and the United States enjoys a surplus.

With revenues swelled by a vigorous economy and a booming stock market, the budget deficit this fiscal year should run $30 billion to $40 billion, experts say. But that's not the whole story. In the year ending Sept. 30, an inflation rate of about 2 percent will cut $80 billion from the purchasing power of the $4 trillion in federal debt owed by the public. Subtract that $80 billion from a $40 billion deficit, and the bottom line on the budget - in real terms - no longer looks red. To economist Robert Eisner, the fuss in Washington over the budget deficit is "much ado about nothing." The Northwestern University economist expects the official deficit to disappear in "a year or two" as the economy grows. Others are less optimistic. Cynthia Latta, an economist at DRI/McGraw-Hill, a Lexington, Mass. consulting firm, anticipates a $65 billion deficit next fiscal year. Congress, she notes, is boosting spending, not cutting it. The cost of entitlements, such as Medicare, continues to grow. And with economic growth slowing, revenues will not rise so fast, she adds. Nonetheless, because the deficit is small, the ratio of outstanding federal debt to total economic output is shrinking. So, in real terms, is the amount of debt owed, in theory, by each man, woman, and child. "By any measure, federal debt is going down," Mr. Eisner says. "It's wonderful," says Arthur Laffer, a "supply-side" economist who advised President Ronald Reagan. Many Democrats blame Mr. Reagan for doubling the federal debt in eight years. "So, shoot me," jokes Mr. Laffer, now chairman of Laffer Associates, an investment advisory firm in Sorrento Valley, Calif. He defends the Reagan cuts in marginal tax rates that helped boost the deficits in the 1980s. …

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