Tom at BizzyBlog is reporting a story that most U.S. media outlets have deemed not newsworthy, the customary treatment of positive economic news during a Republican administration.
What Happens If a Deficit Falls and Almost No One Reports It?
For the first four months of fiscal year 2007 (Oct.2006-Jan 2007) federal tax revenues are up 9.7% from the same period in FY2006. The budget deficit for the same first quarter is down 57% from the same period a year ago. That this is taking place despite large outlays for the Iraq campaign makes the news that much more striking in terms of what it says about the dynamism of the current U.S. economy. Consider also that the year (FY2006) used for comparison was one in which the deficit also decreased considerably from the previous year.
Another notable item from Tom's post is that the capital gains tax cuts of 1997 by Clinton, and the additional Bush cuts in 2003 stimulated huge increases in the amounts of capital gains income reported and subjected to tax in subsequent years. The "average annual reported capital gains subject to taxation TRIPLED from 1990-1996 to 1998-2004." Tom and others note that if this trend continues, our budget could be in "surplus" as early as 2008, in contrast to Bush's recent projection of 2012 as a target year for a surplus.
But Tom also adds one qualifying statement relative to how our government, regardless of the party in power, performs this budget accounting
...I’m not particularly impressed with the concept of a “surplus†as most define it, because the current large Social Security annual surpluses are needed (i.e., “raidedâ€) to accomplish that. A true surplus that begins to actually leave the Social Security surplus where it belongs (i.e., the Social Security system) won’t, according to my projections, take place until FY 2012 — and that’s only if the Bush tax cuts of 2001 and 2003 are extended past their current expiration in 2010. If that doesn’t happen, forget about the idea of getting to a true surplus while leaving Social Security alone for quite a long time.Posted by dan at February 13, 2007 10:10 PM