Budget surplus is a rare phenomenon in countries’ life. Countries, in general, deal with a common problem, that is, ‘deficit’. United States had experienced the problem of budget deficit that persisted for decades. After a long struggle, the federal budget scenario gradually changed during the last half of 1990s. This change started with gradual decline in the deficit from 1993 to 1996, than it became close to balance in 1997 and finally moved into surplus in 1998 for the first time in the history of United States. Social scientists and historians put
forward number of reasons for the budget surplus, such as, individual income tax receipts, slower growth of medical costs, lower interest rates, economic growth, and the 1990 and 1993 deficit-reduction laws.
Budget surplus was an unprecedented phenomenon for policy makers and practitioners. They interpreted it from different angles. Both political parties, Republican and Democrat had different views on the budget proposals. Number of proposals had been put forward from both parties. President Clinton proposed reducing the projected surpluses by 32 percent through spending increases for defense, education, and other programs, and tax cuts to fund
individual saving accounts. Congress (dominated by Republican), o n the other hand, adopted a budget resolution that proposed tax-cut strategies to reduce the projected surpluses.
This paper examines factors responsible for that surplus and evaluates the presidential and congressional proposals for the utilization of surplus.
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