February 6, 2007
The big story in the Fiscal 2008 budget ($2.9 trillion) that President Bush unveiled yesterday is that with a little spending restraint, Congress could balance the budget in no time, says the Wall Street Journal.
- The White House predicts that its new budget will eliminate the deficit by 2012 assuming President Bush's tax cuts are extended after 2010.
- Even the Congressional Budget Office (CBO) predicts the deficit should remain near or below 1 percent of gross domestic product for the rest of the Bush Presidency; that's well below the 40-year average of 2.4 percent of GDP.
This also means that the federal debt burden will continue to fall:
- Alarmists point to the $1.4 trillion rise in total federal debt from 2003-2006, but that amount is dwarfed by the $14 trillion in new household wealth created over the same period.
- And for all the international scolding of an allegedly profligate America, U.S. federal debt as a share of GDP is falling again; at 37 percent in 2006 and heading south, the U.S. figure compares to 52 percent in Germany, 43 percent in France, and 79 percent in Japan.
The real game to watch isn't debt or deficits but spending, says the Journal:
- From 2001-2005, outlays ballooned by $609 billion, or 33 percent and Bush never did veto a spending bill.
- By contrast, on current pace his second term outlays will grow by 21 percent -- hardly tightfisted, but a third slower.
The other news you won't often hear concerns the soaring tax revenues in the wake of the 2003 supply-side tax cuts:
- Tax collections have risen by $757 billion, among the largest revenue gushers in history.
- Receipts, especially from high-income individuals and corporations, have been growing for some two years at nearly twice the rate of spending, which explains the falling deficit.
Source: Editorial, "Fiscal Revelation," Wall Street Journal, February 6, 2007.
Browse more articles on Tax and Spending Issues