Posted on 05/07/2013 1:10:12 PM PDT by Kaslin
The Congressional Budget Office released updated projections today to find that the federal budged deficit is smaller than at this point last year, and smaller than at any time since the 2008 financial crisis. There are three main reasons for that: the slowly-improving economy is putting more people back to work, which means fewer safety net payments and more tax revenue; defense spending cuts; and the tax hikes from January 1 2013 have gone into effect.
Indeed, it's not the spending side of the ledger that has shrank the budget deficit, but the tax side. Projected outlays for the first half of the 2013 fiscal year are $11 billion smaller than in 2012, while the federal government collected $220 billion more in tax revenue.
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As the CBO detailed:
Taxes withheld from workers’ paychecks rose by $99 billion (or 9 percent), mainly because of higher wages and salaries, the expiration of the payroll tax cut in January 2013, and increases (beginning in January) in tax rates on income above certain thresholds.
And about the small dip in government spending:
Some of the decline in spending from 2012 to 2013 stems from changes to the estimated cost of past transactions of several credit programs (notably for TARP, the Troubled Asset Relief Program). With those changes excluded and with adjustments for the timing shifts, the difference would have been smaller — about 0.5 percent.
One of the largest dips in spending is due to military cuts - the federal government spend $16 billion less over the first seven months of 2013 than it did for that time period in 2012.
Much of this is to be expected - as the economy recovers, there will naturally be an increase in tax revenue and a drop in social safety net spending. At least part of this, however, is due to President Obama's ideal version of a "grand bargain" on tax hikes and spending cuts - mostly tax hikes on upper income-earners and spending cuts that fall heavily on the military. It also is not a sign that President Obama is some kind of deficit hawk. He's just a textbook Keynesian.
Extra money?
Quick - spend it on something!
Look out elections 2014 and 2016....If the economy continues to recover and deficit drops out or becomes a surplus despite Obama...no Republicans in the majority for the foreseeable future...
Also, tax revenues increased as a result of gains that were accelerated into 2012 to avoid the 15% to 20% increase on capital gains that took effect at the beginning of the year. And uncertainty about the impact of the 3.8% investment tax under Obamacare has led a lot of estimated tax payers to increase their quarterly payments this year — they don’t want to face underpayment penalties when they file next year.
“Quick - spend it on something!”
LOL. The California approach. Spend it when you have it. Spend it when you think you might have it. Spend it when it won’t have to be paid for ten years. Or to paraphrase Al Davis, “Just Spend, Baby!”
“or becomes a surplus despite Obama”
Not to worried about that. Gas prices are high and Obamacare is coming. They will prevent any big revenue producing boom. It would require a REALLY big revenue producing boom to create a surplus.
Besides, if the deficit gets too low, Congress will spend it up again.
This will be a short-lived phenomenon as people adjust their tax profiles to expose even less to the tax man. GDP will decline so that there is less work and lower tax receipts.
Just about 1 year, I expect.
I don’t think the GDP will shrink but will remain nearly flat.
You are correct about adjustments though.
Until the Obama care problem is resolved, there will be little incentive to alter the status quo. If it is gone, there will be growth. If it remains,there will be decline.
What that means is that things are so bad now that they're still even worse than they were during the financial crisis--
--and if we'd be so much better off if only we could crawl out of this recovery and have another financial crisis like the one in 2008.
The deficit for half a year is $489 billion. We will still run close to a trillion dollar deficit in FY 2013.
LOL. What are you smoking? Since when is a $489 billion deficit over 6 months going to result in a surplus anytime soon? SS and Medicare payments will continue to rise as our aging population retires. We will not run a budget surplus in our lifetime.
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