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| WHY BALANCE THE BUDGET? August 8, 1997 |
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Questions asked
in this forum:What's the difference between the deficit and the national debt? Should domestic spending be considered as "investments?" How does the deficit relate to the $300 million interest payment? Is balancing the budget short-sighted? Will a balanced budget reduce interest rates? Does the budget deal include a plan to reduce the national debt? Viewer comments on a federal balanced budget
NewsHour Backgrounders
July 29, 1997:
A background report and debate on the budget deal struck by Congress and the White House.
June 26, 1997:
The Senate works on finishing touches for the budget reconciliation.
June 10, 1997:
Rep. Bill Archer and Treasury Secretary Robert Rubin discuss the budget negotiations.
May 22, 1997:
The Senate works through numerous amendments on its way to a balanced budget deal.
May 2, 1997:
Congress and the President make a deal to balance the budget by 2002.
February 26, 1997:
The Republican Balanced Budget bill is rejected by the Senate, overturned by one vote.
February 7, 1997:
Office of Management and Budget Director, Franklin Raines, and Sen. Pete Domenici (R-N.M.), debate President Clinton's budget proposal.
January 30, 1997:
The NewsHour historians look at the history of bipartisanship.
Browse the NewsHour's coverage of the Budget
Browse past Shields and Gigot debates.
Outside Links:
The Office of Management and Budget has placed President Clinton's FY 1998 Federal Budget request on the Internet.
After 18 years of rising deficits and mushrooming debt, what once seemed impossible is now within reach: a balanced federal budget. Due to an unexpected increase in tax revenue from a strong economy, the deficit -- the amount the federal government needs to borrow to make up the difference between what it spends and how much it collects in taxes and other fees -- may be around $34 to $37 billion for Fiscal Year '97, which ends Sept. 30, 1997.
While that sounds like a lot, it represents only about 2 percent of the federal government's approximately $1.7 trillion annual budget. That amount is below original deficit estimates of $67 billion and it is down from a record-setting deficit of $290 billion in 1992.
Some interesting facts: if you excluded the $300 billion the government spends to pay interest on the debt, which now stands at $5.4 trillion, the Treasury would have a surplus of almost $270 billion.
However, Congressional Republicans and President Clinton still think this is the time for a long-term balanced budget agreement that stops increasing the national debt. They argue that by limiting the amount of money the federal government borrows, more money is available for loans to individuals and businesses, thus providing the capital needed to grow the economy.
But some Congressional Democrats and certain economists are questioning whether we really need to balance the budget. In an $8 trillion national economy, $30 billion dollars is a trifle. Plus, they point out, almost four-fifths of the debt, in the form of Treasury bills, is held by Americans. The interest from those T-bills is used to grow retirement accounts and college funds. So, when the federal government pays off the debt, for the most part, it will be paying off fellow Americans.
And realistically, in less prosperous times, when tax revenues fall, money to balance the federal books will have to come from scaling back entitlement programs like Medicare and Social Security, which account for almost half of the federal budget. According to critics, the current budget deal does not fully address these issues.
So balancing the budget may not be as straight-forward as we would like. Despite the claims of the budget deal's proponents, questions remain: What would be the real impact of a balance budget? Will the current budget deal between President Clinton and Congressional Republicans really balance the federal books by 2002? Are we giving up too much to balance the budget?
Paul Solman, the NewsHour's economics correspondent, answers you questions about a balanced budget.
Questions asked in this forum:
What's the difference between the deficit and the national debt? Should domestic spending be considered as "investments?" How does the deficit relate to the $300 million interest payment? Is balancing the budget short-sighted? Will a balanced budget reduce interest rates? Does the budget deal include a plan to reduce the national debt? Viewer comments on a federal balanced budget
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