South-Western College Publishing - Economics  
Looking Even Better
Subject Federal Budget Surplus
Topic Taxes, Spending, and Deficits
Key Words Budget Surplus, Budget Deficit, Gross Domestic Product
News Story

After decades of deficits, the U.S. budget went into the black last year and forecasts predicted that the budget surpluses would continue for at least the next few years. President Clinton announced yesterday that previous forecasts needed to be revised, and that White House economists had raised their estimates of this year's budget surplus by more than 40 percent. The President said that the surplus for the fiscal year ending September 30, 1999, would be at least $76 billion. The President's complete budget package is to be released February 1 and, aides said, the official projection could exceed $80 billion.

The Administration's initial budget estimates, released in May 1998, called for a $54 billion surplus. The Congressional Budget Office subsequently estimated the surplus at $63 billion in November. Higher than expected economic growth, strong employment growth, lower than expected interest rates, and an increase in tax payments probably related to the surging stock market were responsible for the upward revision in the budget figures.

Each new statement confirming a budget surplus is accompanied by a discussion of what should be done with it. Mr. Clinton pledged to preserve the surplus until Social Security reform has been enacted. Congressional Republicans want to use the surplus to provide a big tax cut. The President has proposed a series of new programs that, he maintains, will not involve the surplus. Also proposed is a sharp increase in spending for after-school and summer programs aimed at children of working parents.

(Updated February 1, 1999)

1. How is a government surplus or government deficit calculated?
2. What is the relation between the government surplus and the total debt of the U.S. government?
3. What happens to government expenditures during a period of economic expansion? What happens to government expenditures?
Source Jeanne Cummings and Jacob M. Schlessinger, "White House Boosts Surplus Estimate Over 40%", The Wall Street Journal, January 7, 1999.

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