"These are the good ol’ days. These are the best of times. After this, it gets worse."
-Congressional Budget Office Director Douglas Holtz-Eakin
The best thing you can say about the federal deficit is that its merely enormous, down from gigantic. (Break out your party hats!)
The Keynesians amongst you will note that this is exactly the sort of deficit spending which is actually good for the economy, stimulative as it is during a post-recessionary period.
Well, not exactly the sort of spending that is Keynsian. He would advocate deficit spending during a recession. Further, history teaches that Lord Keynes was more enamored of large public works programs of Robert Moses, or Public Works Administration (PWA) and the Works Progress Administration (WPA) under FDR. Create jobs, improve infrastructure, develop useful projects. Wartime spending and big tax cuts were hardly his strategies.
The irony is that its the Supply-Siders who are deficit spending. While the tax cuts (income, dividend, and capital gains) are certainly consistent with this discredited branch of economic philosophy, one is hard pressed to reconcile the significant — and not particularly efficient — jump in outlays:
The Federal Deficit: The Soft Prejudice of Low Expectations
click for larger graphic
The WSJ noted:
"The CBO this week, in its latest monthly budget report for the first two-thirds of the fiscal year through May, tried to account for the improved deficit picture . . .
Individuals’ income-tax payments were up 20%, and the CBO suggested the growth was "more concentrated" among taxpayers who pay the highest rates — the wealthy whose incomes have grown faster than those of lower-income Americans in recent years. Such conclusions can’t be certain until more data are available in the coming year. Another factor, the CBO said, were lower-than-expected tax refunds. Corporate revenues in the first eight months were 48% higher, reflecting profits growth in 2004. The CBO said its next report, which will reflect June 15 estimated-tax payments, will be the first to gauge corporate profits for 2005.
Its good advice that we learn to live with deficits. It appears they will be with us for the foreseeable future . . .
Deficit Is Arriving Under Forecasts
Good News for White House Comes on Economy’s Climb, High Level of Tax Receipts
By Jackie Calmes
The Wall Street Journal, June 8, 2005 11:25 p.m.; Page A3