The Economic Consequences of Disappearing Government Debt

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 landscape.