The deficit returns with a vengeance

FOUR QUESTIONS ABOUT THE REturn of the deficit: Whose fault is it? How much larger will it get? When will the U.S return to surplus? Does it matter?

After posting a surplus of $236 billion in Fiscal Year (FY) 2000, the Federal budget deficit will rise to an estimated $165 billion in FY 2002, $265 billion in FY 2003 and $325 billion in FY 2004. That's a $561 billion swing in four years-and if there had not been a recession and stock market collapse, the surplus would have risen another $200 billion over that period. So what accounts for the $761 billion shortfall?

Regardless of what some Democratic politicians say, the Bush tax cuts account for only $150 billion of that gap. During the later years of the Clinton Administration, total Federal government spending rose about 4% per year, but so far under the Bush Administration it has increased 10% per year. About half of that represents automatic increases caused by the recession, and about half represents increased discretionary purchases, including a larger defense budget. I estimate that each of those factors accounts for about an extra $150 billion in spending, for a total of $300 billion. The shortfall in tax receipts due to the recession is estimated at slightly over $300 billion. The net result is that if there had been no Bush tax cut and no increase in discretionary expenditures, the surplus still would have disappeared because of the recession. The Bush programs then added about $300 billion more to the deficit.