Budget Deficit Shrinks Due to Strengthening Economy (Daschle On Life-Support)

The Wall Street Journal ^ | October 15, 2003 | JOHN D. MCKINNON

[Pubbie]

WASHINGTON -- The strengthening economy is helping to hold the federal budget deficit a bit narrower than the soaring level officials projected during the summer.

When the Treasury Department tallies up final figures later this month, it is expected to show a federal budget deficit between $370 billion and $380 billion for the fiscal year that ended Sept. 30. That is still a huge shortfall and far wider than the previous record deficit of $290 billion set in 1992. But it is substantially narrower than the $455 billion the White House predicted a few months ago.

It is also the first bit of good news the Bush administration has had on the budget front in some time. Democrats dismissed the difference as a drop in the bucket, but some economists said that if the trend continues, it could point the way to more decent budget news in mid to late 2004, just as voters are beginning to focus on the election and President Bush's track record on the economy.

White House Budget Director Josh Bolten told reporters at a breakfast meeting that the fiscal-2003 deficit would come in below $400 billion. He called the development "modest good news" for an administration that has seen unexpectedly large budget shortfalls the past two years.

Douglas Holtz-Eakin, director of the Congressional Budget Office, agreed that the budget picture is improving a bit, saying there are "lots of indications it could come in below $400 billion."

Analysts warned against reading too much into the improving budget picture, however, saying it could prove to be short-lived. Currently, the deficit is projected to reach as much as $500 billion for fiscal 2004, when the budget effects of Mr. Bush's tax cuts and the extra spending on the Pentagon and homeland security are likely to peak.

But economists said the latest developments suggest that the deterioration of the government's fiscal situation has begun to ease. Rising profits are leading the way by pushing up corporate-tax collections. Lou Crandall, chief economist at Wrightson ICAP, estimated that corporate tax receipts would total $40 billion in September, a $5 billion improvement from September 2002, if it weren't for a one-time budget gimmick in the 2003 tax-cut bill that shifts some of that revenue into October. Tax withholding from paychecks also is showing some improvement, in a possible reflection of job gains.

The government also is spending a bit less than expected on defense as well as Medicaid and the federal welfare program. But the defense money still is likely to be spent this year or next, limiting the long-term effect on the budget picture, officials at the White House Office of Management and Budget cautioned.

Several analysts speculated that the White House intentionally overestimated the deficit somewhat last summer, hoping to generate some good news this fall. "I had the sense [last summer] that they put out a number that was easy to beat," said Ed McKelvey, a Goldman Sachs economist.

Administration officials rejected that idea. They said the White House has been burned repeatedly the past two years by revenue estimates that proved to be overly optimistic, and sought to be as conservative as possible this time around. Even with the recent uptick in tax collections, fiscal 2003 is expected to be the third year in a row that the federal government has collected less money in absolute dollar terms than the year before.

In fact, estimating the budget picture has never been an exact science. During the final few years of the Clinton administration, while the stock-market bubble was expanding, budget surpluses swelled in part because officials consistently underestimated tax collections. Now, projecting budgets has become more difficult than ever, thanks to all the tax-law changes under Mr. Bush.

[Pubbie]

The US GDP is growing faster, the economy is starting to create jobs.

If the Budget deficit starts to shrink then it's all over for the Democrats next year...

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[RiflemanSharpe]

Good News.

[Lunatic Fringe]

But it is substantially narrower than the $455 billion the White House predicted a few months ago.

Smart move... predict terrible news, and Americans breathe a sigh of relief when the news is only "bad." CUT. SPENDING. NOW.

[areafiftyone]

Daschle on Life Support

ROFLMAO!

[Lunatic Fringe]

But it is substantially narrower than the $455 billion the White House predicted a few months ago.

Smart move... predict terrible news, and Americans breathe a sigh of relief when the news is only "bad." CUT. SPENDING. NOW.

[Pubbie]

It's called "Strategery"!

[Arrowhead1952]

Democrats dismissed the difference as a drop in the bucket, but some economists said that if the trend continues, it could point the way to more decent budget news in mid to late 2004, just as voters are beginning to focus on the election and President Bush's track record on the economy.

If the budget deficit shrinks due to a strengthening economy Daschle will be on suicide watch. The RATs along with the media will spin this and try to repeal the tax cuts, no matter how small the deficit becomes.

[rllngrk33]

The budget deficit could be eliminated overnight if the 535 princes and princesses in congress would learn that it's not their money they're spending. It's the taxpayers money. Now if they could just make the connection between taxpayers and voters...

[rllngrk33]

Now, projecting budgets has become more difficult than ever, thanks to all the tax-law changes under Mr. Bush.

Sounds like some personal bias/opinion has been injected here.

[Pubbie]

Yes we would have 0 unemployment if weren't for Bush "Giving away" all that money to those EEEEEEEEEEEEEVIL Rich White Males.

[randita]

Agree this is strategery. Watch for the budget deficit to come down drastically. This accomplishes two important goals: 1) takes all the air out of the Democrat balloon that the tax cut is responsible for spiraling deficits and a failing economy and 2) beautifully sets up another tax cut proposal for passage during 2004, an election year.

[Constitutional Patriot]

"Now if they could just make the connection between taxpayers and voters..."

Unfortunately for tax payers, there is a sizeable amount of voters who don't pay taxes (but do live off tax payers).

[grumple]

Ref# post 12 - Didn't Dick Morris predict this in one of his columns a while back? Something about the taxt cuts are being well timed?

[dead]

Time for “Tommy Daschle’s Dollhouse Funnies!”

[supercat]

The budget deficit could be eliminated overnight if the 535 princes and princesses in congress would learn that it's not their money they're spending.

I wish I had a machine that could replace "government" with "taxpayers" in various news reports about how the Illinois "government" will be giving money to this or the U.S. "government" will be spending money on that.

[Clintonfatigued]

Things are slowly beginning to look up as the year progresses. I hope this is the harbinger of a national trend.

[Grampa Dave]

I think that a few rats and rinos in California got the message last Tuesday when we flushed Herr Davis down the toilet.

Now if some other states with rats in control and severe deficit problems due to over spending would do the same, the message will help in November 2004 across our nation.

[alrea]

Monsier Dashell and Madame Hillary are going to do everything they can to insure that job creation doesn't follow this recovery.

[Grampa Dave]

They are losing that battle except maybe in states like California, Oregon and Washington where rat governors and rat legislatures since the time of Bubba have been anti business re laws, regulations and in the media.