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Wachovia Securities Economist John Silvia Says Budget Debate Masks Rising Shift of Economic Resources into the Public Sector CHARLOTTE, N.C. - The debate over interest rates and federal deficits has drawn investors' and taxpayers' collective attention away from an underlying trend of rising federal spending that is steadily shifting more resources into the public sector, Wachovia Corp. Chief Economist John Silvia said in his latest economic White Paper. With the gaze of the media and markets transfixed on defense spending and the return of budget deficits, Congress has allowed total federal spending as a percentage of gross domestic product to rise for the second straight year after a ten-year decline, Silvia said in his white paper, "Budget Trends: Why the Private Sector Still Cares." "Rather than spending restraint, we will see spending growth in excess of nominal GDP growth for the second year in a row. Federal spending is outpacing the ability of the economy to support such growth," Silvia said. Despite the fact the U.S. economy has been recovering from recession, projected budget deficits have grown to $69 billion from a surplus of $26 billion last year. Although falling federal tax revenues and increased defense spending have played a part, the deficits also have been fueled by rising outlays for Medicare and income security programs, including unemployment benefits and certain federal pensions. "The underlying trends are more significant for investment performance and the structure of society over the next ten years," he said. "These trends affect not just investment performance, but the very nature of how economic resources are allocated over time." A copy of the White Paper is available by contacting Jim Pierpoint, Wachovia Securities communications manager, at jim.pierpoint@wachovia.com or 704-374-5612. About John Silvia Prior to joining Wachovia in February, Silvia was a senior economist for the U.S. Congress Joint Economic Committee and chief economist of the Senate Banking Committee. From 1983 to 1999, Silvia was chief economist for the Kemper Funds and served as a managing director of Scudder Kemper Investments. During those years, he served on advisory committees for the Federal Reserve Banks of Cleveland and Chicago as well as for the Public Securities Association. Wachovia Corporation (NYSE:WB), created through the Sept. 1, 2001, merger of First Union and Wachovia, had assets of $320 billion and stockholder's equity of $29 billion at March 31, 2002. Wachovia is a leading provider of financial services to 20 million retail, brokerage and corporate customers throughout the East Coast and the nation. The company operates full-service banking offices under the First Union and Wachovia names in 11 East Coast states and Washington, D.C., and offers full-service brokerage with offices in 49 states and global services through more than 30 international offices. Online banking and brokerage products and services are available through wachovia.com and firstunion.com. |
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