October 7, 2006

More Detail on the Budget Deficit

From an extended report by AP carried at Forbes, with a minor dose of bias by writer Andrew Taylor:

But when measured against the size of the economy, which is the comparison economists think is most important, the deficit picture looks even better.

At 1.9 percent of gross domestic product, the 2006 deficit registers far below those seen in the 1980s and early 1990s. The modern record of 6 percent of GDP came in 1983 and deficits greater than 4 percent in 1991 and 1992 drove Congress to embark on a 1993 deficit-cutting drive.

….. Tax receipts are up $253 billion, a whopping 12 percent over last year. That’s the thirds consecutive year of strong revenue growth after a dismal performance in the early part of the decade. Revenues dropped three years in a row after fiscal 2000 but picked up again in 2004.

Taxes paid quarterly on corporate profits and by wealthier people and small businessmen were especially strong in 2006. Corporate income taxes rose 27 percent over 2005 while nonwithheld receipts increased 19 percent.

Uh, sorry Mr. Taylor, the “deficit-cutting drive” known to most as “the 1993 tax increase” did signal the beginning of serious attempts to reduce the deficit. The final Bush budget for the fiscal year that ended in September 1993 (based on the budget passed in 1992) held federal spending growth to only 1.6%. Fiscal 1994′s deficit was over $200 billion. Then from 1995-1999, the Gingrich Congress managed to hold average annual spending growth to an average of 3.8% per year, while growth-stimulated tax revenue growth averaged 7.7% during that period. That’s why there were finally budget surpluses in the late 1990s.

But this isn’t the REALLY big news. Wait until tomorrow for that.

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