Posted on 07/16/2005 12:37:25 PM PDT by Tumbleweed_Connection
After three years of steadily climbing budget shortfalls, President Bush finally had some good fiscal news Wednesday: Surging revenues and a steady economy have led to a steep drop in the expected deficit for this year.
The annual White House midyear budget report projects that this year's deficit will drop to $333 billion, $79 billion below last year's record red ink and almost $100 billion less than earlier estimates.
Bush said the improving deficit picture vindicated his stewardship of the economy and budget.
"It's a sign that our tax relief plan, our pro-growth policies, are working," Bush said after a Cabinet meeting. "These numbers indicate that we're going to cut the deficit in half faster than the year 2009 - so long as Congress holds the line on spending."
Democrats on Capitol Hill countered that the deficit for the budget year ending Sept. 30 would still be the third largest ever and that the use of $173 billion in surplus Social Security taxes hides the true deficit.
"The debt is going up like a scalded cat," said Sen. Kent Conrad of North Dakota, ranking Democrat on the Senate Budget Committee.
Just five months ago, the White House predicted a $427 billion deficit for the year and red ink totaling $1.1 trillion over five years.
Last year's deficit of $412 billion was a record in dollar terms, though many previous deficits in the mid-1980s and early 1990s were larger when measured against the size of the economy.
The new estimates reflect significant improvement in revenues, which so far are coming in at levels 15 percent higher than last year.
"The nation's budget picture has improved dramatically," said the new White House report. "Due in large part to tax relief, the economy is strengthening and the growing economy is producing the tax receipts necessary to cut the deficit far faster than was initially predicted.
The nonpartisan Congressional Budget Office also sees improvement in the deficit. It said last week that the deficit for this year could dip below $325 billion. CBO's official update will be released next month.
Despite the improvement, the deficit picture remains far worse than when Bush took office in 2001, when both White House and congressional forecasters projected cumulative surpluses of $5.6 trillion over the subsequent decade. Then, it forecast a surplus for this year of $269 billion.
Those faulty estimates assumed the revenue boom fueled by the surging stock market and Internet-fueled worker productivity gains would continue. But that bubble burst and a recession and the Sept. 11, 2001 terrorist assaults adversely affected the books. Several rounds of tax cuts, including Bush's signature $1.35 trillion 2001 tax cut, also contributed to the return to deficits three years ago after four years of budget surpluses.
In early 2004, Bush said his goal was to cut the deficit in half in five years. Then, the White House forecast the deficit to be $521 billion for the 2004 budget year, setting the goal of $260 billion by 2009. The White House and most economists preach that the more relevant measure of the deficit is to weigh it against the size of the economy. Measured that way, the latest estimates for this year are slightly worse than recent historic averages.
Now, the White House forecasts a $162 billion deficit for 2009, which would represent a little more than 1 percent of GDP. The improvement for that year would come, it says, despite a $22 billion cost foreseen for deficit-financed private Social Security accounts. The cost of the private accounts - a Bush proposal that Congress has not yet addressed in legislation - would reach $54 billion in 2010.
CBO Director Douglas Holtz-Eakin, a former economist at the Bush White House, warns that it is too early to predict whether the improvements seen recently will be long lasting. In any event, he says, the looming retirement of the Baby Boom generation presents intractable long-term problems that can only be fixed by curbing the growth in government benefit programs like Medicare and Medicaid.
Much of the growth in tax receipts seems to have come from relatively wealthy taxpayers, since the biggest revenue increases have come from quarterly payments on capital gains and business income instead of from withholdings from wages. In addition, much of the revenue surge has come from one-time factors such as a good stock market performance last year and the expiration of a tax break allowing businesses to more quickly write off investments in new equipment.
Democrats warned that the long-term deficit picture is not as rosy as the White House projects since it leaves out the long-term costs of occupying Iraq and Afghanistan and ensuring that the alternative minimum tax does not bite more taxpayers. The tax is aimed at making sure that wealthy tax dodgers pay at least some tax, but it is creeping up on the middle class.
On top of that, deficit estimates have fluctuated wildly - up and down - for years.
"It's a little early to start cheering," said Rep. John M. Spratt Jr., D-S.C., top Democrat on the House Budget Committee. "And no one should forget the track record of projecting surpluses over the last five years."
On the economy, the White House foresees a 3.6 percent real growth rate for this year, slowing to 3.4 percent next year.
How long before Buish gets bashed on this thread?
Bush* even
How 'bout that sh!t. And evil rich people got a tax cut ta boot!
Schumerspeak?
Ya gotta love these guys. "Surpluses as far as the eye can see!" Wasn't that what they told us?!
Ann Coulter was right. "To liberals, history started this morning."
Isn't that perfect, the good news really is bad and the better news is getting worse. These people are beautiful.
Nope, I fell victim to the "qwerty" keyboard "u" and "i" and right next to each other.
No, it was Clinton's policies, just ask St. Hillary...
He shouldn't be bashed for never using the veto, or that he adamantly said he would never approve a capital gains tax cut. ? The fact is we didn't get a good tax cut until congressman Bill Thomas took over the process and GWB kept his mouth shut except to say he would sign whatever came out of congress (like that would be a surprise, he signs everything).
Republicans should realize that the Dems and the media are going exert a lot of pressure to increase wasteful spending. The last thing the Dems and the media want is for Bush to get credit for a reduced deficit. The GOP needs resist that, and cut spending, not increase it.
well, if you haven't noticed the sentate doesn't do much... and if the President were to veto even less would get done.
He rarely used the veto in Texas, either. It's his style, and what he meant by the "new tone in Washington." What's the senate doing anyway, creating more regulations and departments? Whatever it is, it costs a whole lot of money with not much to show for it.
I can't believe this nonsense! The title even insists that its only the Bush administration who is crediting the deficit reduction to his policies!
Why does he have to sit there and hold their hands? They are adults, Republicans are the majority leaders, he shouldn't HAVE to veto.
Yes, I credit Bush's policies for it too--especially the tax cut.
Ah! The worthless, Marxist, essentially sociopathic Democrats--how will they cope with all this bad (for them) news??? If they were not such a disgusting bunch of sociopaths and morons, you could almost feel sorry for them. I observe with authority; my parents, grandparents, and great grandparents were all Democrats. My children are ALL Republicans!
Why isn't the 1% of the MSM that is sympathetic to Bush's policies (translation: pro-American, pro-truth)helping to promote this good news?
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