BPEA | 2000 No. 2

The Economic Consequences of Disappearing Government Debt

Brian P. Sack and
Brian P. Sack Macroeconomic Advisers, LLC
Vincent R. Reinhart
Vincent R. Reinhart American Enterprise Institute
John Heaton

2000, No. 2

FEDERAL BUDGETARY DEVELOPMENTS in the United States of late have
been fast moving and nothing short of outstanding: The latest projections
of the Congressional Budget Office (CBO) peg the federal surplus for fiscal
year 2000 in excess of $230 billion, around $50 billion more than its
forecast of just six months earlier. For a generation accustomed to mounting
government obligations and dire warnings of adverse macroeconomic
consequences, a surplus in 2000 amounting to 2.4 percent of nominal
GDP—the largest since 1948—would seem to imply a changed economic