The U.S. fiscal position has deteriorated significantly in recent years. In 2000, the Congressional Budget Office (CBO) projected surpluses in the range of 3 percent of GDP for the next 10 years and for the federal debt to be nearly paid down by 2010. Since then, partly because of the economic downturn, but also reflecting policy initiatives to boost spending and cut taxes, the budgetary balance has swung into substantial deficit. The fiscal deficit seems likely to reach over 4 percent of GDP in FY2004 and to remain significant well into the future.

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