How Should the Surpluses Be Spent?

The federal budget deficit is disappearing; some shadows linger, but the latest Congressional Budget Office projections put the government budget in deficit by only $5 billion in fiscal year 1998, in balance by 2001, and in surplus through at least 2008. In this Policy Note, Research Associate David Alan Aschauer examines the likely economic consequences, particularly on saving, investment, and long-term economic growth, of three alternative uses of budget surpluses: paying down the debt, increasing government spending, and cutting taxes.

 

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