Federal Budget Deficit

Report Outline
Debate Over Deficit
Effects of Deficit
Reduction Options
Special Focus

Debate Over Deficit

Current Projections of Record Deficits

As election year 1984 opens, the long-awaited recovery from the worst recession in 40 years continues to pull much of the U.S. economy out of the doldrums. Recent government statistics bring good news of falling unemployment, increasing industrial production and rising retail sales—without the burst of inflation that has stunted recent recoveries.

President Reagan, apparently poised to seek a second term in office, points to these statistics as evidence that his controversial supply-side economic policy has succeeded in bringing about sustained, non-inflationary growth. But many economists, some within the administration itself, predict that the recovery will be stopped in its tracks unless drastic measures are taken to reduce the federal budget deficit. That deficit totaled $195 billion in fiscal 1983 and if left unattended was expected to approach the $300 billion mark by the end of the decade.

Administration critics blame Reaganomics for the dilemma. They say the president's decision to cut domestic spending and taxes while increasing defense spending brought about the unprecedented imbalance between government revenues and outlays. Reagan claims to have inherited the deficit problem from previous administrations that enacted and enlarged domestic spending programs. Those programs, he says, transferred an increasing portion of the nation's wealth to the federal government at the expense of the private sector.