Deficit Drops by $100 Billion

[biker]

The New York Times this morning on the front page that the US budget deficit may come in $100 billion below the level the Bush Administration had estimated just six months ago.

Budget experts cite an astonishingly large amount of estimated tax payments by corporations and wealthy individuals.

On behalf of all the producers in this country, I say to you whiny lib/lab socialists, "You're welcome."

[biker]

To explain WNY's persistently gloomy outlook in the face of a roaring economy, you need only look at what dominates the headlines on our paper this morning: "Cops Gone Wild".

A lengthy story about the zealous Gestapo in Buffalo busily writing tickets and tacking on unsupported fees.

And the storm-troopers wonder why the overwhelming majority of law-abiding citizens can't stand them.

I bet the citizens on Davison feel much safer now that one copper has cost them so much.

[speaker]

Here is the whole article:

WASHINGTON, July 8 — An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year, even though spending has climbed sharply because of the war in Iraq and the cost of hurricane relief.
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Graphic: Mixed Signals

On Tuesday, White House officials are expected to announce that the tax receipts will be about $250 billion above last year's levels and that the deficit will be about $100 billion less than what they projected six months ago. The rising tide in tax payments has been building for months, but the increased scale is surprising even seasoned budget analysts and making it easier for both the administration and Congress to finesse the big run-up in spending over the past year.

Tax revenues are climbing twice as fast as the administration predicted in February, so fast that the budget deficit could actually decline this year.

The main reason is a big spike in corporate tax receipts, which have nearly tripled since 2003, as well as what appears to be a big increase in individual taxes on stock market profits and executive bonuses.

On Friday, the Congressional Budget Office reported that corporate tax receipts for the nine months ending in June hit $250 billion — nearly 26 percent higher than the same time last year — and that overall revenues were $206 billion higher than at this point in 2005.

Congressional analysts say the surprise windfall could shrink the deficit this year to $300 billion, from $318 billion in 2005 and an all-time high of $412 billion in 2004.

Republicans are already arguing that the revenue jump proves that their tax cuts, especially the 2003 tax cut on stock dividends, would spur the economy and ultimately increase revenues.

"The tax relief we delivered has helped unleash the entrepreneurial spirit of America and kept our economy the envy of the world," President Bush said in his weekly radio address on Saturday.

Democrats and many independent budget analysts note that overall revenues have barely climbed back to the levels reached in 2000, and that the government has borrowed trillions of dollars against Social Security surpluses just as the first of the nation's baby boomers are nearing retirement.

"The fact is that revenues are way below what the administration said they would be a few years ago," said Thomas S. Kahn, staff director for Democrats on the House Budget Committee. "The long-term prognosis is still very, very bleak, and the administration doesn't have any kind of long-term plan."

One reason the run-up in taxes looks good is because the past five years looked so bad. Revenues are up, but they have lagged well behind economic growth.

The surge could also evaporate as quickly as it appeared. Over the past decade, tax revenues have become much more volatile, alternately soaring and plunging in the wake of swings in the stock market and repeatedly defying government projections.

Nevertheless, the short-term change has been striking. At the beginning of the year, the Congressional Budget Office projected that this year's deficit would be $371 billion and the White House Office of Management and Budget put the figure at $423 billion.

Corporate tax payments are expected to exceed $300 billion, up from $131 billion three years ago. The other big increase is an extraordinary jump in individual taxes that were not withheld from paychecks, usually a reflection of taxes on investment income and executive bonuses.

The jump in receipts is providing Mr. Bush and Republicans in Congress with a new opportunity to assert that tax cuts of 2001 and 2003 are working and that Congress should make them permanent.

Pat Toomey, president of the Club for Growth, a conservative political fund-raising group, said: "The supply-siders were absolutely right. All the major sources of revenue have grown, especially in areas where we said they would."

But budget analysts, supporters and critics of Mr. Bush alike, cautioned that this year's windfall would do little to improve the government's long-term budget woes.

Government spending under Mr. Bush continued to climb rapidly this year, more than twice as fast as the economy. Spending on the war in Iraq has accelerated, to about $120 billion this year.

Far more ominously, the nation's oldest baby boomers will be eligible for Social Security benefits in just two years. Conservatives and liberals alike predict a huge escalation in costs of Social Security and Medicare over the next several decades.

"The long-term outlook is such a deep well of sorrow that I can't get much happiness out of this year," said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and a former White House economist under President Bush.
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Despite almost five years of economic growth, individual income taxes — the biggest component of federal tax revenues — have yet to reach the levels of 2000. Even with surging payments for investment profits and business income, individual tax payments in 2005 were only $972 billion — below the $1 trillion reached in 2000, even without adjusting for inflation.

Over all, individual and corporate taxes have lagged well behind the economy's growth over the past five years. Government spending, by contrast, mushroomed far faster than the economy.

And federal debt has ballooned to $8.3 trillion, up from $5.6 trillion when Mr. Bush took office. Republicans are trying to raise the authorized debt ceiling to $9.6 trillion.

War costs for Iraq and Afghanistan have totaled more than $300 billion since 2003, and the Bush administration has not included any war costs in its budget estimates beyond next year.

Domestic discretionary programs, like education and space exploration, have slowed their growth after climbing rapidly in Mr. Bush's first term. But entitlement programs, particularly Medicaid and Medicare, are climbing rapidly as a result of rising medical prices and Mr. Bush's prescription drug program.

Outlays for Medicare have climbed 15 percent this year and are expected to hit $300 billion. About half of that increase results from the new prescription drug program, which is expected to cost nearly $1 trillion over the next 10 years.

"Even if spending is not going up as fast as it was before, it's not coming down," said Robert L. Bixby, executive director of the Concord Coalition, a bipartisan group that advocates budget discipline.

Despite a public outcry this year over pork-barrel spending sought by individual lawmakers for local projects, Mr. Bixby said, the main causes of higher spending stem from the war in Iraq and entitlement programs.

Both supporters and critics of Mr. Bush cautioned against attributing much long-term significance to the recent fiscal improvement, in part because tax revenues have become more volatile.

In the late 1990's, revenues exceeded predictions by more than $100 billion a year. After the recession of 2001, revenues plunged about $100 billion below what could be explained by slower economic growth and higher unemployment.

One reason for the increased volatility may be that, contrary to a popular assumption, a disproportionate share of income taxes is paid by wealthy households, and their incomes are based much more on the swings of the stock market than on wages and salaries. About one-third of all income taxes are paid by households in the top 1 percent of income earners, who make more than about $300,000 a year. Because those households also earn the overwhelming share of taxable investment income and executive bonuses, both their incomes and their tax liabilities swing sharply in bull and bear markets.

"These people have incomes that fluctuate much more rapidly, so when the economy is doing well and the stock market is doing well, tax revenues will be up," said Brian Riedl, a budget analyst at the Heritage Foundation, a conservative research organization. "Rapidly fluctuating tax revenues will continue to be the norm for years to come."

Compared with the size of the economy, tax revenues are still below historical norms and far below what the administration predicted as recently as 2003.

Tax receipts amounted to about 17.5 percent of the nation's gross domestic product in 2005, far below the level five years ago and still slightly below the average of 18 percent since World War II. Spending, by contrast, is running at about 20 percent of gross domestic product .

"Spending has not been restrained," Mr. Riedl said. "One hundred percent of the reduced deficit is because taxpayers are sending more money to Washington."


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[WestSideJohn]

Biker is either a fool or deliberately trying to mislead us. Probably both.

A reduction in the deficit is great, but there shouldn't be a deficit in the first place. The Bush administration has given us the largest deficits in our nation's history, and Biker says "you're welcome?" Nobody said "thank you."

[biker]

Thanks for posting the whole thing, Speaker.

I was only able to pick up what I could read while buying bagels at 7:00 AM this morning.

[biker]

Now that I've been able to read the whole article, I can't believe most of what was spent on trying to explain away what is terrific news.

But what else can one expect from the NYT.

I suppose on Friday they had articles on how miserable the economy is with unemployment so low.

[biker]

A report, delivered to a ntaional summit of mayors, country executives, state officials, and community leaders who met in Denver May 10-12 under the aegis of the federal Interagency Council on Homelessness contained the following highlights:

--An 11.5 percent decline in homelessness in the Denver metro region, including a reduction in street homelessness from 1,000 to 600 persons since January 2005;

--Just a few weeks ago, New York City reported a modest, yet "remarkable," 13 percent reduction in street population.

--A month ago, Dallas--the sixth largest city in our country--reported an overall decrease of a modest 3.3 percent, and a reduction in the chronic homeless population of 26 percent.

--In Miami last month, Mayor Diaz reported in his State of the City address a 30 percent reduction in the street population.

--In Portland, Oregon, the street numbers are down 20 percent, with 600 people experiencing chronic homelessness having been placed into permanent housing.

--In Philadelphia over the last several years the numbers on the streets have fallen more than 50 percent.

--In San Francisco a reported 28 percent decrease in homelessness.

"Why is this not news?" asks our correspondent. "Because it came out in a Republican administration?" Maybe our cynicism wasn't misplaced, after all.


From the weekly Standard.

[speaker]

[biker]

Jobs are up.

Unemployment is low.

Deficit dropping; at this rate, we'll be in surplus in a couple of years.

Homelessness disappearing.

This is a golden age.

[speaker]

Now there's a stretch.

[biker]

Now there's a stretch.

Not at all.

The danger for us is that we don't recognize it as such. And then when things are tough, we look back and say, "We could have fixed social security, but didn't. And now we can't."

[biker]

We are looking at the 17th quarter of double digit (i.e., greater than 10%) earnings increases.

That is fantastic news for every American.

Partisan debaters made the case that the gains in earnings in 2003 or 2004 were just a normal recovery from recessionary levels. They have been silent the past two years because: 1)there hasn't been a national election; 2)in 2005 and 2006 even a partisan can't make that argument. The recession is histoire.

Savings, investments and investment earnings are good for everyone. By the seventies, even Dems publicly stated that.

But away from partisan politics.

More jobs, more earnings is good for everyone.

[WestSideJohn]

Deficit dropping; at this rate, we'll be in surplus in a couple of years.

Once again, we should have been there all along. Clinton and a Republican Congress balanced the budget, but under President Bush federal spending has gone up 35%, we've had record deficits, and not a single spending bill has been vetoed.

Tax and spend is bad. Borrow and spend is worse.

[tronix75]

Once again, we should have been there all along. Clinton and a Republican Congress balanced the budget, but under President Bush federal spending has gone up 35%, we've had record deficits, and not a single spending bill has been vetoed.

Tax and spend is bad. Borrow and spend is worse.

The only thing Clinton had to do with balancing the budget is he was present when it happened. But the real bad news was the Republicans didn't balance the budget by reducing spending, on the contrary spending increased.
The only reason that the budget was balanced was that tax receipts were higher than usual at the time. And the deficit was not reduced by all the budgetary slight of hand, but actually increased.

Yep, and Congress just passed an appropriations bill with 1500 earmarks. So much for a small deficit reduction, Our wise and frugal government swine in action.

[WestSideJohn]

If you want to give the credit to the Republican Congress, that's fine with me. I don't much care who gets the glory. The budget was balanced, and even with the circumstances you list it still beats record-setting deficits any day of the week. I'll say it until I'm blue in the face:

Tax and spend is bad. Borrow and spend is worse.

The national debt is crippling us, and it's disgusting that generations of leadership of the country with the world's most powerful economy have brought us to the point where our debt is what, 8 trillion dollars now? Our interest payments alone are close to half a trillion dollars every year.

Despite Biker's attempts to muddy the water, this simply isn't a partisan issue. We're all being screwed, regardless of which lever we pull in the voting booth.