WHAT SHALL WE DO WITH THE SURPLUS?:

U.S. budget deficit could shrink further in 2007 (Reuters, Oct 16, 2006)

"As long as we don't find new things to spend money on and we have moderately sub-trend (economic) growth in the mid-2 percent range, it looks as if some improvement (in the deficit) is likely," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey.

A narrowing budget deficit improves the government's ability to pay for long-term obligations, such as Social Security and health-care benefits, and also tends to push down interest rates.

Crandall is currently forecasting a fiscal 2007 budget deficit of $200 billion to $250 billion. The midpoint of that range would represent a 9.2 percent narrowing over fiscal 2006, which ended September 30.

How would you keep growth that low when falling gas prices are boosting consumer confidence and falling interest rates will keep the housing market from deflating much?

Posted by Orrin Judd at October 16, 2006 8:52 PM