A budget crisis is returning to the United States. Along with worsening trade deficits, record budget shortfalls projected for the fiscal year 2003 and beyond are reviving a nightmare threat of "twin deficits." It is worrisome for global growth and security that the world's only military and economic superpower will be shackled by domestic and external imbalances for years to come.
The U.S. federal budget for fiscal 2004, which begins Oct. 1, totals $2.23 trillion, up 4.2 percent from the current fiscal year, according to the budget proposal that President George W. Bush sent to Congress earlier this month. With the total revenue estimated at $1.92 trillion, up 4.7 percent, a record deficit of $307 billion is forecast, exceeding the $304 billion for fiscal 2003.
The massive deficit has erased in just two years the surpluses generated in the four years through fiscal 2001. The administration of former President Bill Clinton made deep cuts in defense spending, thanks to the end of the Cold War, and used the savings -- the "peace dividend" -- to begin paying off the massive deficit that had accumulated over the years. It was as if a cherished dream had come true.