#public-finance

I was born in September 1994, which means that some of my earliest years happened to coincide with one of the strangest fiscal periods in modern American history.

I obviously did not know this at the time. I was learning to read and riding a bicycle while the federal government was doing something it had almost forgotten how to do: bringing in more money than it spent. In fiscal year 1998, the United States recorded its first federal budget surplus since 1969. The surplus grew in 1999. Then, in fiscal year 2000, it reached $237 billion, or about 2.4 percent of the entire economy. Federal debt held by the public was actually being paid down.[1]

There was something almost futuristic about the mood surrounding the numbers. At the beginning of 2001, the Congressional Budget Office projected that, if the laws then on the books remained in place, the federal government would accumulate $5.6 trillion in surpluses between 2002 and 2011.

Instead, it accumulated $6.1 trillion in deficits.

That is an $11.7 trillion difference between the fiscal future the country could see from January 2001 and the one that actually arrived.[2]

I have been trying to understand what happened in between.

The obvious place to look is September 11. The attacks transformed American foreign policy, created an enormous new security apparatus, led directly to wars in Afghanistan and Iraq, and began commitments whose financial consequences are still arriving decades later. It is tempting to draw a clean line from the balanced budgets of my early childhood to the War on Terror and then onward to the immense public debt of the present.