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Money, Money, Money

With [personal] incomes and [business] profits growing rapidly, the U.S. budget deficit will fall to about $145 billion during the twelve months ending in April. To put this in perspective, the deficit was $455 billion as recently as three years ago . . . . These trends increase our confidence in the lonely forecast we made in early February that the budget deficit would . . . disappear in Fiscal 2009, possibly before.

Go figure.

There's more:

On the spending side, so far this fiscal year outlays are up less than 3%.

Man, that's *less* than the prevailing inflation rate. Plus today's spending levels are based on what the GOP did last Congress. Hmm. Does Lou Dobbs know about that? Um, is Lou Dobbs still employed???

But of course the authors of this piece are not Pollyannas:

We assume [federal spending will] accelerate to a 4.5% - 5% annual growth rate through 2009.

Good assumption. The lunatics, after all, did re-take control of the lunatic asylum.

Continuing:

Our deficit projections show that the US is slightly ahead of the actual 1990s deficit path. In 1996 - almost six years into recovery - the deficit was still 1.4% of GDP. The first surplus arrived in 1998. We expect the deficit to be just under 1% of GDP for Fiscal 2007 (almost six years into the recovery), with surpluses arriving in 2009 or earlier.

We had a budget deficit almost all the way through the 1990's? Sacre bleu! Did the media know about that??? Did academia???

Here's the real money quote:

Those who argued that the tax cuts in 2001-03 would create deficits as far as the eye could see are being proven wrong. And, unlike the 1990s, the budget will be balanced without the help of a post-Cold War 'peace dividend.'

By "peace dividend," the authors really meant to say "Clinton recklessly cutting the military to the bone," but that's water under the bridge.

Not all is well on the fiscal front, however, and the authors certainly are aware of that fact:

Unfortunately the surpluses we will achieve will not be permanent. Social Security and Medicare are still problems.

Yep. Hell, referring to Medicare and the National Ponzi Scheme as "problems" is sort of like referring to death as a "minor inconvenience."

Massive spending cuts or tax hikes (or both!) may hit is in a few decades.

The latter is guaranteed if conservative (non)voters continue reflexively committing political suicide every few election cycles.

But for the next several years, as long as spending is restrained, revenue growth will continue to surge and the budget picture will improve faster than conventional wisdom believes - this, in turn, will undercut the push by many politicians to hike tax rates back to pre-2001 levels.

Comments (15)

We ass... (Below threshold)
Ted:
We assume [federal spending will] accelerate to a 4.5% - 5% annual growth rate through 2009.

"Good assumption. The lunatics, after all, did re-take control of the lunatic asylum."

Yeah, that Republican-led Congress was the epitome of fiscal restraint.

There is a difference, my d... (Below threshold)

There is a difference, my dear Theodore, between bad and worse.

this, in turn, wil... (Below threshold)
Mac Lorry:
this, in turn, will undercut the push by many politicians to hike tax rates back to pre-2001 levels.

An example of wishful thinking. There are many politicians who simply don't accept the idea that tax cuts increase tax revenues by stimulating the economy regardless of the facts. That's because such politicians not only have a different opinion they have different facts to support their opinions. I expect we'll to see some of those alternative facts posted here today.

The cost of the Iraq invasi... (Below threshold)
groucho:

The cost of the Iraq invasion and occupation is fast approaching the 500 billion dollar range. Is this expense included in the calculations above? I find it a little hard to reconcile this type of expenditure with a tax cut that results in a 145 billion deficit reduction. There's something missing here.

"The cost of the Iraq invas... (Below threshold)
andrew:

"The cost of the Iraq invasion and occupation is fast approaching the 500 billion dollar range."

The cost of the war has consistently been around 1% of GDP per year. So it wouldn't really offset rising tax revenues since the cost of the war has remained steady over time.

What % of GDP is the 'war o... (Below threshold)
Gianni:

What % of GDP is the 'war on poverty'? Trillions have been spent since the 60's, welfare rolls are much larger, and people now are just as useless and lazy as they were then, probably even more so.

Whats our exit strategy from supporting people who wont support themselves?

"But for the next several y... (Below threshold)

"But for the next several years, as long as spending is restrained..."

What are the chances of that happening? (with either party in control)

All of the morons in Congre... (Below threshold)
Gianni:

All of the morons in Congress use the same philosophy when spending money, be it via Congress, or their campaigns.

Its not their money, why should they care how much they waste??

groucho, BDS is a treatable... (Below threshold)
Scrapiron:

groucho, BDS is a treatable disease if you make an appointment early. Let it linger and it turns to untreatable insanity. Look at the democrats in congress for all the proof you need. They have progressed beyond treatment and everyone on the left covers their eyes/ears and alibi's the most dangerous and traitorous (to America) congress in history.

Who are the authors of this... (Below threshold)
Wieder:

Who are the authors of this pile of crap?

Just explain all this BS to the vanishing Middle Class.

Jayson, you DO realize you'... (Below threshold)
bryanD:

Jayson, you DO realize you're citing a sales brochure?

Vanishing middle class inde... (Below threshold)

Vanishing middle class indeed, pull the numbers, the middle class is shrinking because more people are moving upwards (same with the lower class).

I find it a little hard... (Below threshold)

I find it a little hard to reconcile this type of expenditure with a tax cut that results in a 145 billion deficit reduction. There's something missing here.
Posted by: groucho at May 1, 2007 08:22 AM


What's missing is a basic understanding of economics.

Tax RATES can be lowered without diminishing tax REVENUES, provided they are cut in such a way as to stimulate greater economic growth (i.e., lowering rates by category, NOT "targeted tax cuts" which amount to direct subsidies to preferred clienteles). In some cases, cutting tax rates actually increases the revenues, as when capital gains rates were slashed in the '90s and taxes flooded into the government as a result of people turning over investments they had been holding to avoid being taxed.

It's not a zero-sum game.

Expecting any liberal or De... (Below threshold)

Expecting any liberal or Democrat to refrain from trying to raise taxes is foolish in the extreme. It's genetic with them.

By "peace dividend," the... (Below threshold)
jim:

By "peace dividend," the authors really meant to say "Clinton recklessly cutting the military to the bone," but that's water under the bridge.

You mean, the exact same military that, with no changes, was able to invade first Afhganistan and then Iraq?

Huh, go figure; it's almost like Clinton was being criticized with hysterical arguments that had no merit, because his actual job performance could not be faulted. CDS?

Unfortunately the surpluses we will achieve will not be permanent. Social Security and Medicare are still problems.

Another wow. Gee, if the Bush admin hadn't deliberately lied to Congress (let's call it what it is) about the cost of the Medicare pharmaceutical co. giveaway (let's call that what it is, too), and Medicare was allowed to collectively bargain with the drug companies (you know, take advantage of the Free Market?) that wouldn't be a problem either.

Oh, and advance the retirement age to 67 and the Social Security problem disappears. Hey, look at that; an actual solution.

Oh, and the current budget figures appear to be totally ommitting the cost of the Iraq war, expected to reach at least $500 BILLION before adults get back in charge of the White House in 2008. Also the cost of caring for wounded soldiers, and actually fulfilling on our obligations to the military, and unknown costs and unforseen circumstances which will certainly occur...

And is the continuing cost of Katrina being factored in also?

See, me, I would call that omission dishonest. But I'm not an economist. I just like to know what's happening with money. There appears to be a difference.

Oh, and our workers' jobs continue to be outsourced and replaced by lower-paid dead-end McJobs at best. While corporate welfare enables billions in tax receipts to be lost, by Cayman Island shelters and the like.

But besides that, everything's awesome.

Please.




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