Politicians are typically late in picking up trends, so it will be interesting to see how long it takes Washington to acknowledge the big story in the Fiscal 2008 budget that President Bush unveiled yesterday: To wit, with a little spending restraint, Congress could balance the budget in no time.These trends have been tracked here as well.
...over the past three years the federal deficit has shrunk by 58%. The Congressional Budget Office--not the White House--is estimating that the current year's deficit (for fiscal 2007) will fall to $172 billion. That's not bad given continuing Katrina relief spending, $30 billion for homeland security, and a couple hundred billion or so to fight the war on terror.
The other news you won't often hear concerns the soaring tax revenues in the wake of the 2003 supply-side tax cuts. Tax collections have risen by $757 billion, among the largest revenue gushers in history. Receipts, especially from high-income individuals and corporations, have been growing for some two years at nearly twice the rate of spending, which explains the falling deficit. Economic growth is always the key to eliminating red ink, which is why keeping this 63-month expansion rolling needs to be the main domestic priority.
If keeping the expansion ontrack is what we seek, this might be worth contemplating.
I guess if I suffered from BDS then it would be easy to chalk this up to the actions of the jobs and prosperity fairy, but we've seen this movie before. The good economic record happens every time tax rates on capital formation are reduced, just like the 1997 capital gains tax reduction.
UPDATE: Thought this John Ray post was a good followup.
Nearly all of the conventional wisdom about the Bush tax cuts is wrong. In reality:
* The tax cuts have not substantially reduced cur-rent tax revenues, which were in fact not far from the 2000 pre-tax cut baseline and over the 2003 pre-tax cut baseline in 2006;
* The increased child tax credit, 10 percent tax bracket, and fix of the alternative minimum tax (AMT) reduced tax revenues much more than most of the "tax cuts for the rich";
* Economic growth rates have more than doubled since the 2003 tax cuts; and
* The tax cuts shifted even more of the income tax burden toward the rich.
Setting optimal tax policy requires governing with facts rather than popular mythology, which is why it is important to set the record straight by debunking 10 myths about the Bush tax cuts.