How the Surplus became a Deficit

[cbdo2007]

How the Surplus Became a Deficit
By Morgan Housel | More Articles
February 2, 2011 | Comments (44)

Exactly 10 years ago, the nonpartisan Congressional Budget Office issued a report projecting that, in 2010, the federal government would run a $796 billion surplus. In reality, 2010 produced a $1.3 trillion deficit.

The difference between the two -- $2.1 trillion -- highlights two important points: Long-term forecasting is futile, and something went horribly wrong over the past decade.

But what? To find out, I compared CBO's 2001 projections with what actually occurred in 2010. Turns out, two factors alone account for the majority of the difference: tax revenue and defense spending.

...It's simpler than that. We had massive tax cuts, two wars, and a giant recession. It's difficult to take seriously any deficit-reduction proposal that doesn't take these into consideration. Something to think about.

http://www.fool.com/investing/general/2011/02/02/how-the-surplus-became-a-deficit.aspx?source=ihpdspmra0000001&lidx=1

[LiberalEsto]

1. So we just need to reverse the process to fix the deficit

1. Get rid of the tax cuts
2. End the wars

[mike_c]

4. +10^15

[n2doc]

6. 6.02x10^23 n/t

[cbdo2007]

7. Yep, it's that simple!

[Poll_Blind]

8. +1

PB

[Tippy]

2. BIG K&R

[jtown1123]

3. big kick. This is some good info

[Gaedel]

5. One thing not mentioned

The forecast for surpluses made the fatal assumption that the level of capital gains (even with their preferential rate) would continue to grow. The end of the dot-bomb bubble sort of torpedoed that notion. Government receipts forecasts had the dot-bomb capital gains as recurring events through 2010.

[cbdo2007]

10. good call

[dkofos]

9. I am so surprised.

[Festivito]

11. Had SCOTUS allowed Gore to win, we'd have that surplus now.

And, we'd be ready to use it to pay SS to the baby boomers who deserve it.