With [personal] incomes and [business] profits growing rapidly, the U.S. budget deficit will fall to about $145 billion during the twelve months ending in April. To put this in perspective, the deficit was $455 billion as recently as three years ago . . . . These trends increase our confidence in the lonely forecast we made in early February that the budget deficit would . . . disappear in Fiscal 2009, possibly before.
On the spending side, so far this fiscal year outlays are up less than 3%.
Man, that’s *less* than the prevailing inflation rate. Plus today’s spending levels are based on what the GOP did last Congress. Hmm. Does Lou Dobbs know about that? Um, is Lou Dobbs still employed???
But of course the authors of this piece are not Pollyannas:
We assume [federal spending will] accelerate to a 4.5% – 5% annual growth rate through 2009.
Good assumption. The lunatics, after all, did re-take control of the lunatic asylum.
Our deficit projections show that the US is slightly ahead of the actual 1990s deficit path. In 1996 – almost six years into recovery – the deficit was still 1.4% of GDP. The first surplus arrived in 1998. We expect the deficit to be just under 1% of GDP for Fiscal 2007 (almost six years into the recovery), with surpluses arriving in 2009 or earlier.
We had a budget deficit almost all the way through the 1990’s? Sacre bleu! Did the media know about that??? Did academia???
Here’s the real money quote:
Those who argued that the tax cuts in 2001-03 would create deficits as far as the eye could see are being proven wrong. And, unlike the 1990s, the budget will be balanced without the help of a post-Cold War ‘peace dividend.’
By “peace dividend,” the authors really meant to say “Clinton recklessly cutting the military to the bone,” but that’s water under the bridge.
Not all is well on the fiscal front, however, and the authors certainly are aware of that fact:
Unfortunately the surpluses we will achieve will not be permanent. Social Security and Medicare are still problems.
Yep. Hell, referring to Medicare and the National Ponzi Scheme as “problems” is sort of like referring to death as a “minor inconvenience.”
Massive spending cuts or tax hikes (or both!) may hit is in a few decades.
The latter is guaranteed if conservative (non)voters continue reflexively committing political suicide every few election cycles.
But for the next several years, as long as spending is restrained, revenue growth will continue to surge and the budget picture will improve faster than conventional wisdom believes – this, in turn, will undercut the push by many politicians to hike tax rates back to pre-2001 levels.