CBO Says 2002 Had Largest Percentage Drop in Federal Revenue in 50 Years - October 15, 2002 Vol. 3 No. 21

October 15, 2002 Vol. 3 No. 21:

Published: 10/15/2002

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CBO Says 2002 Had Largest Percentage Drop in Federal Revenue in 50 Years

The Congressional Budget Office’s (CBO) Monthly Budget Review reports that the $137 billion drop in revenue for FY 2002 represents the largest one-year drop in 50 years. The combination of this reduction in revenue and the increase in spending in response to last year’s terrorist attacks, the increase in the unemployment rate, and steep increases in Medicaid costs amounted to a $157 billion deficit for FY 2002, which ended September 30. Though this return to a deficit represents a $254 billion turn-around from last year’s $127 billion surplus, the deficit is only 1.5 percent of GDP, a manageable size and a great deal smaller than the deficits of the mid-1980’s, which amounted to 6 percent of GDP.

For an overview of CBO’s report on what happened to the surplus, see this OMB Watcher article.