WATCH THOSE DEFICITS PLUNGE
July 10, 1997
Supply-side economists are having an I-told-you-so field day as estimates of the federal budget deficit plunge with each new announcement. How could it be otherwise, they ask, with the economy roaring along on the back of tax cuts enacted in the past two decades?
- In the 1970s, the highest tax rate on personal income was 91 percent, and there were more than 14 separate tax brackets.
- Then along came the Kemp-Roth cuts of 1981 which, despite subsequent tax increases, led to today's highest rate of 40 percent with five brackets.
- Unemployment is now at its lowest rate in decades -- meaning that the pool of workers contributing to Treasury revenues has grown enormously -- and financial markets are setting new record highs, contributing billions of dollars to the revenue pool.
- As a result, it looks as if the federal budget deficit could fall to as low as $45 billion by September 30, 1997 -- $67 billion lower than what was predicted in May 1997.
Government officials now say the nation is closing in on a balanced budget -- perhaps as early as 1998.
Many economists are concerned, however, that Congress and the President will relax their budget-cutting efforts and embark on yet another spending spree. They advise the politicians to keep in mind the taxpayers -- and keep at bay temptations to create costly new government programs.
Source: Editorial, "The Supply-Siders' Revenge," Investor's Business Daily, July 10, 1997.
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