It was widely believed that congressional leaders were eager to seal this summer's budget deal so they could escape Washington for their August vacations. In fact, they were facing a more pressing deadline. Despite all the rhetorical hot air about balancing the budget by 2002, the budget threatened to balance itself as early as next year.
Stronger than expected growth in tax collections, caused by a rising job base and a vibrant economy, had led government forecasters to reduce their deficit projections for the past three years. In February, the Office of Management and Budget projected a fiscal year 1997 budget deficit of $126 billion. By May, the Congressional Budget Office had reduced that projected deficit to $67 billion. Neither the OMB nor the CBO updated the estimates prior to the summer's budget deal for fear that news of a disappearing deficit would dissipate support for the agreement. By July budget watchers, extrapolating from monthly Treasury Department reports, estimated that the coming year's deficit would be no more than $45 billion. After the legislation was signed, OMB estimated this year's deficit would fall to $37 billion. The CBO projected a $34 billion gap.
"If Congress did absolutely nothing, the federal budget would have fallen into balance as early as next fiscal year," says William Armistead, a vice president at Citizens for a Sound Economy. Congress, of course, did act, in concert with the White House. And their so-called balanced budget act increases spending over current levels, keeping America in the red for at least a few more years.