The elimination of the U.S. federalbudgetdeficit during the 1990s marked a significant fiscal milestone at the time. The unified budget surplus in FY1998 was the first surplus in nearly 30 years, and surpluses in the following years were the largest relative to GDP since 1951 ( Figure 6.1 ). 1
Figure 6.1. FederalBudgetDeficit
(In percent of GDP)
Source: Congressional Budget Office.
Although the prolonged economic boom played a major role in turning the fiscal position around, a shift in the direction of policies was also instrumental. In
Herbert Stain, Paul Krugman, Georg Koopmann, Klaus Matthies, and Beate Reszat
Governing the $5 Trillion Economy
Oxford University Press, New York, NY, USA, 1989, viii + 145 pp., $17.95.
Herbert Stein’s essay provides a welcome perspective to the current debate concerning the United States federal fiscal deficit. He argues persuasively that focusing exclusively on balancing the federalbudgetdeficit is inappropriate. Not only does the “correct” definition of the deficit depend on the purpose to which the measure is being applied and the magnitude, but also to the structure of federal expenditures and revenues