Date registered: Jan 2007
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Funny How Time Flies - US Economy - Jayhawk Get off Your High Horse
Administration announces record annual budget surplus
October 24, 2000
Web posted at: 2:19 PM EDT (1819 GMT)
WASHINGTON (AP) -- Flush with tax revenues from a booming economy, the federal government posted a record $237 billion surplus for the budget year that ended in September, the Clinton administration announced Tuesday.
It marked the third straight year of surpluses, something that hasn't happened since the late 1940s.
The official announcement of the 2000 surplus comes only two weeks before voters elect a new president. A major point of contention between Vice President Al Gore, the Democrats' presidential pick, and Texas Gov. George W. Bush, the Republicans' choice, has been what should be done with surpluses that are projected to total $4.6 trillion over the next decade.
Bill Clinton's legacy
Bush has proposed a $1.3 trillion across-the-board tax cut, while Gore has proposed smaller, targeted tax cuts and more government spending.
The government's 2000 surplus surpassed the previous record of $124.4 billion for fiscal year 1999 and came on top of a $69.2 billion surplus in fiscal year 1998. The 1998 surplus marked the first time the government had managed to finish in the black since 1969.
The last time the government reported three consecutive years of surpluses was in 1947, 1948 and 1949.
The record-breaking economy is in its longest-ever streak of uninterrupted growth. Americans are enjoying plentiful jobs, low inflation -- outside of recent burst of energy -- and rising incomes. The prosperity also is helping to generate more tax revenues.
Economists say one of the cornerstones to the prosperity has been low unemployment. The surging economy pulled the nation's unemployment rate back down to a three-decade low of 3.9 percent in September from an already low 4.1 percent in August.
President Clinton last month had estimated a surplus of around $230 billion for the recently ended fiscal year and the Congressional Budget Office was predicting $232 billion.
Revenues for fiscal year 2000, which ended Sept. 30, totaled $2.03 trillion, while expenditures came to $1.79 trillion, the Treasury Department and the Office of Management and Budget said.
Individual tax payments totaled $1 trillion, compared with $879 billion in fiscal year 1999. Payments from corporate taxes came to $207.3 billion, up from $184.7 billion.
NEW YORK (CNNMoney.com) -- The budget deficit will jump by $246 billion to $407 billion this year, the Congressional Budget Office estimates in a report released Tuesday.
"Over the long run, growing budget deficits and the resulting increases in federal debt would lead to slower economic growth," the agency said.
The budget deficit shot up 153% from last year's shortfall of $161 billion. The government's fiscal year ends Sept. 30. The agency attributes the jump to "a substantial increase in spending and a halt in the growth of tax revenues."
That drop in revenue is driven in part by an estimated 15% decline in corporate tax receipts. They fell as a result of lower corporate profits and tax rules governing how businesses depreciate their investments this year. A second factor is the rebates provided to tax filers from the economic stimulus law Congress passed earlier this year.
The spending hike is partly due to efforts by the government "to cover the insured deposits of insolvent financial institutions," the agency said.
To date, 11 banks have been seized by the FDIC this year - not a high number historically, but higher than it's been in recent years - and that number is expected to grow in the coming months.
The CBO said it expected the deficit to exceed $400 billion - or 3% of gross domestic product - for each of the next two years if current policies remain in place. It also forecast several more months of "very slow" economic growth.
"The nation is experiencing a significant period of economic weakness," said Peter Orszag, director of the CBO, in a press briefing.
The CBO's estimate for the cumulative deficit over the next 10 years is now $2.3 trillion. Earlier this year, the CBO estimated the country would have a $300 billion surplus by 2018. But that was wiped out in part because of new spending approved by lawmakers for the war in Iraq and Afghanistan and revised economic projections.
And the 2.3 trillion figure doesn't account for the likelihood that the 2001 and 2003 tax cuts will be extended or that the middle class will continue to be protected from the Alternative Minimum Tax - or so-called wealth tax. If those extensions are made - and both presidential nominees have been calling for that, at least in part - then the 10-year deficit projection jumps to more than $7 trillion.
Putting Fannie and Freddie on the books
The agency's latest estimates do not reflect the Treasury announcement this weekend that the government would temporarily takeover Fannie Mae and Freddie Mac, the two government-sponsored enterprises that form the backbone of the mortgage market.
But Orszag said that come January, the CBO will be incorporating the activities of Fannie and Freddie in its baseline for the federal budget. The CBO will be working with House and Senate budget committees to address questions of just how transactions by both companies should be accounted for - the answers to which will greatly influence the net effect the companies have on the federal deficit.
"The degree of control exercised by the federal government is so strong that the best treatment is to incorporate [the agencies] into the federal budget," Orszag said.
To allay one concern that many taxpayers have expressed, the roughly $5 trillion in loans that Fannie and Freddie own or back would not be added wholesale to the debt held by the public, Orszag told CNNMoney.com.
"I don't see a scenario in which you take a total of the mortgages backed and add that to the federal deficit," he said.
But beyond all these near-term concerns affecting the government's debt load, he said the biggest challenge facing the country's coffers is rising health care costs. Federal spending on Medicare and Medicaid alone is expected to jump 30% in the next decade - from 4.6% of GDP this year to 6% in 2018. By 2050, it could jump to 12% of GDP.
As a result, Orszag said in the press briefing, "The nation is on an unsustainable fiscal course."
And you feel you are living the American Dream Jay, you feel like we should stick to the plan?
3. Paul Hamm, Gymnast: I owe a lot to my parents, especially my mother and father.