Of Voodoo and Revenue

When President Bush pledged in 2004 to cut the deficit in half by 2009, critics guffawed. The Boston Globe headlined a story, “Bush’s plan to halve federal deficit seen as unlikely; higher spending, lower taxes don’t mix, analysts say.” “Fanciful,” “laughable” and “all spin,” said the critics.

Well, it turns out that 2009 might be coming early this year. ... This year, the deficit could go as low as $300 billion, right around the 2009 goal of 2.5 percent of GDP.

The deficit climbed unexpectedly in the early Bush years and is declining unexpectedly now, not because the projections for economic growth were wildly off, but because the kind of people who pay the most taxes took a bath early in the decade and are recovering now. Almost 47 percent of income taxes are paid by those making more than $200,000 a year, and they are thriving again. A chunk of the current revenue surge is also from corporate income taxes, which are up 30 percent over last year.

If current trends in federal spending and tax receipts continue, the unified budget would move into balance on Feb. 3, 2009. That’s a ten-month slippage from last month’s trends; what a difference a month makes.

I am mildly disappointed—not that the budget would take longer to balance (...that doesn’t bother me a bit), but that "VG Day" would happen after election day 2008—thereby removing much of the entertainment value from the upcoming presidential campaign.

A quick peruse through some of the lefty economists is amusing. I would blog it, but I just don't have the time right now.

But the bottom line is that cutting taxes worked for Reagan, and even though George W. inherited the Clinton Recession, it worked for him too.

Blog post #6072 in category Economics
posted 20 June 06

Posted by tgirsch on Tuesday at 10:14 AM