The Congressional Budget Office (CBO) recently projected that the federal budget deficit would reach $401 billion this year and $480 billion in fiscal 2004. These projections, which are similar to recent projections released by the Office of Management and Budget (OMB), have rekindled concerns about U.S. fiscal policy. These concerns are justified because continued increases in the deficit could pose significant economic problems in the future, but they must be tempered with an understanding of how these deficits arose and how the U.S. can rebound from them. The rapid improvement in the U.S. fiscal position in the late 1990s demonstrates that a combination of strong economic growth and modest spending restraint can return the budget to balance. A similar prescription applies today.