US deficit dropping...

[Xiahou]

July 8 (Bloomberg) -- Rising tax payments and a growing economy may push the U.S. federal deficit down to $325 billion or lower, a 24 percent decline from the previous estimate, the Congressional Budget Office said.

....

``Treasury receipts have been skyrocketing since April,'' and in June ``corporate receipts will lead this boon,'' said Ellen M. Beeson, an economist at the Bank of Tokyo-Mitsubishi Ltd. in New York, in an interview before the report. Her firm expects the July 13 report to forecast a 2005 deficit of $315 billion to $330 billion.

Read the whole story.

2 questions.
1. Does anyone think this doesn't have anything to do with Bush's tax cuts, particularly on dividends?
2. Seeing as how "corporate receipts will lead this boon", is there any doubt that the economy is going strong?

[Pindar]

....
Read the whole story.

2 questions.
1. Does anyone think this doesn't have anything to do with Bush's tax cuts, particularly on dividends?
2. Seeing as how "corporate receipts will lead this boon", is there any doubt that the economy is going strong?

1. no.

2. no.

What's more interesting is the lack of comment this as generated in the news cycle.

[Alexander the Pretty Good]

In some ways, at least for the media, good news = bad news.

Plus, who's gonna admit Bush was... right? Or at least, not wrong.

[bmolsson]

I think it's only temporary....

[PanzerJaeger]

Good news.. How will the liberals spin it?

[Lemur]

Good news.. How will the liberals spin it?

If you really want to know, your wish is my command.

July 11, 2005
Un-Spin the Budget

By PAUL KRUGMAN

Later this week the White House budget director plans to put on an aviator costume, march up to a microphone and declare Mission Accomplished in the war on deficits. O.K., I'm not sure about the costume bit.

Seriously, the administration is poised to do the same thing on the budget that it has done again and again in Iraq: claim that a modest, probably temporary lull in the flow of bad news shows that victory is around the corner and that its policies have been vindicated.

So let me do some pre-emptive de-spinning and debunking.

To understand where the budget deficit came from, you can't do better than the Jan. 18, 2001, issue of the satirical newspaper The Onion, which predicted the future with eerie precision. "We must squander our nation's hard-won budget surplus on tax breaks for the wealthiest 15 percent," the magazine's spoof had the president-elect declare. "And, on the foreign front, we must find an enemy and defeat it."

And so it has turned out. President Bush has presided over the transformation of a budget surplus into a large deficit, which threatens the government's long-run solvency. The principal cause of that reversal was Mr. Bush's unprecedented decision to cut taxes, especially on the wealthiest Americans, while taking the nation into an expensive war.

Where's the good news? Well, for the past four years actual tax receipts have consistently come in below expectations, so that the deficit is even bigger than one might have predicted given the administration's don't-tax-but-spend-anyway policies. Recent tax numbers, however, finally offer a positive surprise. The Congressional Budget Office suggests in its latest monthly budget review that the deficit in fiscal 2005 will be "significantly less than $350 billion, perhaps below $325 billion." Last year the deficit was $412 billion.

The usual suspects on the right are already declaring victory over the deficit, and proclaiming vindication for the Laffer Curve - the claim that tax cuts pay for themselves, because they have such a miraculous effect on the economy that revenue actually goes up.

But the fact is that revenue remains far lower than anyone would have predicted before the tax cuts began. In January 2001 the budget office forecast revenues of $2.57 trillion in fiscal 2005. Even with the recent increase in receipts, the actual number will be at least $400 billion less.

And nonpartisan budget experts, such as Ed McKelvey of Goldman Sachs, believe that even the limited good news on the budget is a temporary blip, not a turning point. Douglas Holtz-Eakin, the director of the Congressional Budget Office, warns us to take the new revenue figures with a "grain of salt," and declares that "if you take yourself to 2008, 2009 or 2010, that vision is the same today as it was two months ago."

A close look at the tax data explains why these experts believe that we're seeing a temporary uptick in revenues, not a sustained change in the trend. Taxes that are closely tied to the number of jobs and the average wage, such as payroll taxes and income taxes automatically withheld from paychecks, aren't showing any big pickup. This confirms other data showing that the economy as a whole is, if anything, doing worse than one would expect at this stage of an economic recovery.

It turns out that all of the upside surprise in tax receipts is coming from two sources. One is tax payments from corporations, up both because last year corporate profits grew much more rapidly than the rest of the economy and because the effective tax rate on corporations went up when a temporary tax break, introduced in 2002, expired. Both are one-time events

The other source of increased revenue is nonwithheld income taxes - taxes that aren't deducted from paychecks but are instead paid by people receiving additional, nonsalary income. The bounce in nonwithheld taxes probably reflects mainly capital gains on stocks and real estate, together with bonuses paid in the finance and real estate industries. Again, this revenue boost looks like a temporary blip driven by rising stocks and the housing bubble.

In other words, we're still deep in the fiscal quagmire, with federal revenues far below what's needed to pay for federal programs. And we won't get out of that quagmire until a future president admits that the Bush tax cuts were a mistake, and must be reversed.

[PanzerJaeger]

My wallet would have to disagree with that assessment.

Its awful hard to find that fiscal quagmire they keep talking about, but im still looking.

[Gawain of Orkeny]

Its awful hard to find that fiscal quagmire

To them everything is a quagmire. Afghanastan , Iraq and this just for starts.

[Xiahou]

I'm suprised Krugman even took time to try and play it down. The MSM has all but quashed the story- I had to go to Bloomberg to find it and it wasn't front page news there, at least not when I looked.

Imagine how good the budget picture would look if we didn't have the prescription drug entitlement.

[Redleg]

I'm suprised Krugman even took time to try and play it down. The MSM has all but quashed the story- I had to go to Bloomberg to find it and it wasn't front page news there, at least not when I looked.

Imagine how good the budget picture would look if we didn't have the prescription drug entitlement.

LOL - that will tweak a few people.

The biggest fraud done on the middle-class taxpayer by the government yet is the Prescription Drug entitlement program.

[Gawain of Orkeny]

The biggest fraud done on the middle-class taxpayer by the government yet is the Prescription Drug entitlement program.

Look at this. In a thread avout how good the economy is doing even us conservatives cant help but bash Bush And they said we walk in lockstep with the administration. The difference is our complaints are legitimate.

[Red Harvest]

The thread title is wrong. The deficit is most assuredly rising. The annual shortfall is declining, finally, but the overall deficit has continued to rise since Dubya took the helm. The annual deficit is still several hundred billions worse than when Dubya started down this path.

Perhaps you missed this: "In January 2001 the budget office forecast revenues of $2.57 trillion in fiscal 2005. Even with the recent increase in receipts, the actual number will be at least $400 billion less."

So those tax cuts have cost us a couple of trillion, and we are still coming up short. You've got to using hallucinogens to think the tax cuts have "saved us." If we were looking at about a $400 billion a year SURPLUS, then I would be inclined to agree. Unfortunately, that is not the case.

[Xiahou]

I think you're really knitpicking first of all- but second, I stand by the title. The deficit is less than it was projected to be. Debt is still rising, but the deficit is less.

Perhaps you missed this: "In January 2001 the budget office forecast revenues of $2.57 trillion in fiscal 2005. Even with the recent increase in receipts, the actual number will be at least $400 billion less."

Hmm, did anything else happen besides tax cuts that would affect the economy after Jan 2001? Hmmm... let me think....

[Azi Tohak]

Yup, President Bush kept giving money to the rich.

Oh wait...nevermind. I think Bush's (well his econ people's) plan is working. The democratic joke (err...party) wants the same thing that the republicans want, money for themselves. The democrats are just perfectly happy to keep pandering to the stupid, while republican's understand that people are going to screw up, and some are going to die. The democrats believe (and have suceeded in brainwashing the public) into thinking the government can solve all your problems. That is why the liberals control the media.

Azi

[Goofball]

I think it's important do differentiate between the words deficit and debt.

All this news means is that the government is only going to spend $325 billion more than it takes in during this budget period, as opposed to a much higher number that was previously projected.

That means the national debt will still increase by the entire $325 billion.

That's really nothing to brag about.

[Don Corleone]

Well, as a balanced budget fanatic, I'm forced to agree with you on this one, Goof. This is like a kid coming home with all "D's" on his report card saying "Great news Dad! I didn't fail anything!"