[This article expands on ideas in an op–ed that appeared in the Financial Times, September 13, 2002. The author would like to thank for useful comments Jack Frankel, Bill Gale, Jeff Liebman, Arnold Kling and Peter Orszag.]

Almost overnight, the Bush Administration has thrown away long–sought and hard–fought budget balance. Official projections from the Congressional Budget Office now show renewed federal budget deficits lasting well into the future, contrary to what was forecast by the White House forecasts when passing its tax cuts. The projected cumulated 10–year surplus has been slashed by more than half, relative to CBO?s last forecast in March. The truth is in fact worse than that, for many reasons. How did this happen? How did the Republican Party, long associated with fiscal conservatism, come to preside over so large a deviation from good economic policy?