Excerpt
We look back on the late 1990s as a rare time when the federal government ran budget surpluses. We tend to forget that those surpluses came as a surprise to almost everybody.
As late as 1998, the Congressional Budget Office was predicting a deficit for 1999. In fact, Washington ran its biggest surplus in five decades.
What happened? Above all, economic growth. And that may be a big part of the answer to our current problems.
Yes, the government became more fiscally conservative in the 1990s. Both President George H. W. Bush (who doesn’t get enough credit) and President Bill Clinton, working with Congress, raised taxes to attack the 1980s deficits.
But those tax increases were the second most important reason for the surpluses that followed. The most important was the fact that the economy grew more rapidly than expected. The faster growth pushed up incomes and caused more tax revenue to flow into the Treasury.
Today’s looming deficits are almost surely too large to be closed exclusively with growth. The baby boom generation is too big, and the rise in Medicare costs continues to be too steep. Yet growth could still make an enormous difference.
If the economy grew one half of a percentage point faster than forecast each year over the next two decades — no easy feat, to be fair — the country would have to do roughly 40 to 50 percent less deficit-cutting than it now appears, based on my reading of budget data from the economists Alan Auerbach and William Gale.
Need I say? The Party-of-NO, especially in today's atmosphere, will not buy into this. Then again, the GOP has a very long history of ignoring history's lessons.
No comments:
Post a Comment