John A. Tatom argues that triple-digit deficits in 1982 and 1983 arose largely from the strong cyclical downturn in the economy, not from policy actions such as increased defense spending, recent “cuts” in personal income taxes, or burgeoning transfer programs. Tatom points out that the rise in defense spending over the past four years has been greatly outstripped by the rise in spending for federal transfer programs and has contributed little to the 1982-83 deficit picture. Moreover, tax cuts have been largely offset by bracket creep, social security tax increases, and other tax hikes. Tatom explains that the economic effects of deficit increases depend upon whether they are caused by changes in fiscal policy or by cyclical changes in the nation’s income, output, and employment. Most recent discussion of the possible adverse effects of deficits concerns those caused by fiscal policy actions, not the business cycle; this concern is basically irrelevant to the consideration of recent cyclical deficits. Furthermore, Tatom points out that there is no evidence supporting most of the purported adverse effects of higher policy-related deficits, such as higher inflation or interest rates. However, Tatom indicates that current projections of future deficits point to an uptrend in the structural deficit—that part which is related to fiscal policy—as the cyclical component is eliminated. Whether the projected growth of the structural deficit will have adverse effects on the economy is problematic. The lack of evidence that higher structural deficits raise interest rates may be due simply to our lack of past experience with “large” and persistent deficits.