On 13 Oct 2007 23:00:23 -0400, Maxwell Lol wrote:

Gunner writes:

Isnt it good to see Bush has cut the debt in half?

An increase of 2+ Trillion dollars isn't cutting the debt.


October 8, 2006
The Federal Budget Deficit: Bush Benchmark Achieved, Ignored
Filed under: Economy, MSM Biz/Other Bias, MSM Biz/Other Ignorance,
Taxes & Government — TBlumer @ 9:02 am

….. and the best may be yet to come.
___________________________________

A huge point has been virtually if not totally ignored since the
announcement on Friday that the reported federal deficit for the
fiscal year that ended a week ago was $250 billion — The Bush
Administration has done what it said it would do about the deficit
three years ago, and has done it a full three years early, i.e., in
half the time predicted.

This continues what has been a very difficult past few years for those
who deride supply-side economics. If Washington, with a little help
from the states, lets the supply-side engine continue to chug along
for next several years, the results could be so positively stunning
that it would become impossible for supply-side detractors in touch
with any part of the real world to hang on to the comfort of their
static-analysis fantasyland.

But first, let’s recap what has happened in the past three fiscal
years:

* Tax receipts have soared by over 35% (with 5.5%, 14.5%, and
11.7% increases in fiscal 2004, 2005, and 2006, respectively) from
$1.78 trillion to $2.41 trillion (2004 and 2005 results can be found
at Page 2 of this PDF from the Congressional Budget Office [CBO];
2006’s receipts were estimated by adding the $253 billion revenue
increase reported near the end of this longer story).

* Despite the costs of the Iraq War, the rest of the War on
Terror, Katrina relief, and not nearly enough control over other
spending, the administration has accomplished its goal of cutting the
reported deficit in half by the time it leaves office a full three
years early (fiscal 2009, which ends a little less than three years
from now, is the last budget over which the Bush Administration will
have responsibility). Andrew Taylor of the Associated Press reported
on the deficit yesterday (commented on here) but “somehow” missed this
little nugget of good news, even though he reported on the
administration’s original fiscal 2004 promise in a “not going to
happen” manner just under a year ago on October 14, 2005 (last two
paragraphs at link) –

The White House has set a goal of cutting the deficit in
half from the $521 billion prediction for 2004 that it issued at the
beginning of that year. (the original goal was therefore set sometime
before October 1, 2003, the beginning of the 2004 fiscal year — Ed.)

The administration says it is still on track to reach that
$260 billion goal by the time Bush leaves office. But administration
budget projections leave out the long-term costs of occupying Iraq and
Afghanistan, and have yet to be updated with cost estimates of
hurricane relief.

Even with all of those costs included, the administration has
reached its goal. How ’bout that, Andrew?

* Economic growth has averaged an annualized 3.89% during the past
13 quarters since the 2003 Bush tax cuts were passed. This is a record
that for all practical purposes matches the best seven years of the
Clinton administration, but trails the best seven years of the
Reagan-Bush 41 and Kennedy Johnson eras, when more aggressive tax cuts
were enacted:
13QgdpGrowth

(Bottom time period actually ends at 2Q06 — Ed.)

This is all very nice. But it could get better — much, much better. So
much better that it’s scary to even contemplate the possibilities,
because if the ruling class in Washington thinks it might really
happen, they’ll probably figure out how to ruin it.

For starters, understand that I have been using the term “reported
federal deficit” for a reason. The TRUE federal deficit is much
higher. That’s because for decades federal budgetmakers have reduced
the true deficit by the amount by which Social Security tax
collections have exceeded Social Security benefits, and have
“borrowed” that money from the Social Security “Trust Fund” — even
though the “Trust Fund” should be holding and investing those funds to
help cover future benefit payments.

Here, pending what I assume will be very minor revisions, is how
fiscal 2006 really turned out, in billions; the $179 billion listed as
“Social Security surplus” actually consists of a $177 billion Social
Security surplus and $2 billion in positive cash flow from the US Post
Office; both were estimated by the Congressional Budget Office (CBO)
in its August 17 Budget Update Report (large PDF document; information
is at Page 12):
FY2006deficit

All of this is important to understanding the following tantalizing
possibilities:

* If federal tax receipts continue to increase at just 9% per
year, which is only about 70% of the 13.1% average annual increase in
the past two fiscal years, and if federal spending and the Social
Security surpluses in future years turn out as the CBO predicts in the
Budget Report noted above, the last Bush budget in fiscal 2009 will
show a reported surplus.

* If federal tax receipts continue to increase at 9% per year, and
if federal spending and the Social Security surpluses continue to turn
out as the CBO predicts, it will be fiscal nirvana — a
honest-to-goodness REAL budget surplus will occur in fiscal 2011, less
than five years from now.

Here’s is how it will look if the described assumptions hold up:
DeficitThruFY2011proj

So, will these hoped-for serendipitous events take place? Well, there
are certainly a lot of barriers. Here are what I believe to be the
biggest four:

1. The CBO is assuming increases in projected outlays of just over
5% per year; unfortunately, the average increase during the past 5
years has been just under 7%. It’s not like 5% can’t be done; the
average increase in outlays during the first five years of GOP control
of Congress (1995-1999) was only 3.8%. The question is whether there
is anything even resembling resolve in Congress to keep spending under
control.
2. The 9% revenue increases, though less than those of the past
couple of fiscal years, still depend on two things that haven’t yet
happened. First, the tax structure enacted with the Bush tax cuts of
2003 only extends out to 2010. There is absolutely no chance that the
hoped-for revenue increases will materialize unless that tax structure
is made permanent, or at least extended by a minimum of five more
years. Make no mistake: The economy and the markets will treat a
failure in this area for what it would really be — a massive
growth-stalling tax increase that would drastically reduce the rate of
growth in tax receipts, possibly below zero.
3. The other thing that mostly hasn’t happened yet is fiscal
control in the various states. Most of them, thanks to the very
federal tax cuts that some governors and so many Blue Staters deride,
are awash in revenue. Unfortunately, as has so frequently occurred in
the past, most states are simply spending the extra money instead of
taking the opportunity to enact their own economy-stimulating tax
cuts. The states need to do their part to keep the economic engine
running. Ohio (of all states) actually came through on this front with
an income-tax reduction a few months ago, but needs to do much more.
4. Most ideally, the top federal rate should come down further from
its current 35%. In 1986, when the first wave of Reagan tax cuts
started losing steam, it took another cut of the top federal rate to
28% to get the annual pecentage increase in collections back into
double digits again. It’s likely that a cut in the top federal rate to
that same 28% level would accomplish an identical result; it would
certainly make the 9% revenue-increase assumption more likely to come
true, and it could even lead to a level of economic growth closer to
that achieved during the Reagan-Bush 41 and Kennedy-Johnson years.

As has been shown time and time again, suppy-side tax cuts work when
they are allowed to do their magic.