Good News On A Bad Day: Deficit Continues Falling

I don't know how, but somehow this is all due to that master of Senate procedure, Robert Byrd:

The good news this week is the unexpected surge in federal tax revenues that is slashing the federal budget deficit by about $100 billion.

This is especially welcome news to supply-side tax-cutters who argued all along that lower tax rates spur stronger economic growth, which, in turn, creates more jobs that increases tax revenues. That is happening now.

It's embarrassing news for President Bush's diehard Democratic critics, who predicted his tax cuts would worsen the budget deficits and drive the government deeper into debt. They argued throughout last year's elections that the tax cuts failed to grow the economy, create jobs or improve fiscal health.

Surely, it has become quite clear they were wrong on all counts -- again. Indeed, it now appears new tax-receipt numbers at the Treasury are showing a sharp increase in individual, corporate and Social Security payments.

Treasury officials say, thus far, in fiscal 2005, which began last Oct. 1, they have taken in nearly $100 billion more than previously projected. Individual tax receipts were up an impressive 21 percent over last year. Business tax revenues rose a whopping 48 percent. They took in a record $61 billion on June 15 alone.

"The numbers are an eye-popping vindication of the Laffer curve [a theoretical correlation between tax rates and growth] and the Bush tax cut's real economic value," tax-cut crusader Stephen Moore wrote in the Wall Street Journal.

What this means is that, despite somewhat higher spending, "The federal deficit could come in at $325 billion to $350 billion, significantly better than the White House $427 billion projection, or the Congressional Budget Office's $400 billion forecast," writes The Washington Post's economics reporter Jonathan Weisman.

Some fiscal experts now predict the deficit could come in at around $300 billion. My own belief is it will be even lower because the economy is growing much faster than expected. Last week, the U.S. Commerce Department reported that, for the first three months of the year, the economy was growing at an annualized 3.8 percent, instead of the 31/2 percent they initially reported. This revised estimate, in the face of Wall Street fears of economic slowing, provided "more ammunition for Republican boasts that their tax cuts are the cause of this performance," Mr. Weisman reported.

No cowbell or Kim Richards today, alas.