Can Washington Return to the 2001 Balanced Budget Levels?
Many lawmakers and commentators have stated that the budget was balanced as recently as 2001 and have asked why it cannot be brought back into balance at those levels. Of course, lawmakers are free to alter any policy to achieve such a budget, although significantly reducing net interest costs would require major deficit reduction. Virtually all deficit reduction in the 1990s originated from just three sources: • Higher revenues, mostly from a temporary stock and economic bubble. • Lower defense spending following the end of the Cold War, and • Net interest savings resulting from less borrowing, a result of the other two factors. The rest of the federal budget merely remained level as a share of the GDP throughout the decade, which itself may be considered an accomplishment for lawmakers. Returning to those budget levels would not be easy. The stock market bubble is unlikely to return, nor would that be desirable. The 9/11 attacks ended the era of massive defense spending cuts, higher
