« The state tax burden | Main | A manufacturing upswing »
December 08, 2006
What happened to the surplus?
It wasn’t that long ago that the federal government was running budget surpluses and projections showed these surpluses lasting well into the future. But of course in recent years these surpluses have turned to deficits. N.C. State University Mike Walden explains that what happened.
"We have a new study out from the Congressional Budget Office that I think summarizes what happened very well," says Dr. Walden, a professor of agricultural and resource economics.
"They say the most important factor for the turnaround was additional federal spending, particularly on defense and homeland security. Obviously a lot of this was the result of 9/11," he says.
"Second most important factor for the turnaround -- this is very interesting to an economist -- was that they said the economic forecasters simply were wrong," Walden adds. "For one, they did not project the 2001 recession, and they didn’t project the slow recovery from that recession.
"Thirdly were the tax cuts," he concludes. "The CBO analysis says that about 20 to 25 percent of the movement from surplus to deficit was caused by the tax cuts enacted earlier this decade."
Posted by deeshore at December 8, 2006 09:22 AM