In my post of October 8, 2006 (“The Federal Budget Deficit: Bush Benchmark Achieved, Ignored”), I projected that (bold in original):
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 (Congressional Budget Office) predicts ….. the last Bush budget in fiscal 2009 will show a reported surplus.
In fact, our models expect average tax revenue growth of 9% over the next three years and spending growth of between 4% and 5%. This will generate a well below consensus deficit in FY07 of just $115 billion. Next year in FY08, we forecast a deficit of only $35 billion. On a 12-month basis, we suspect that the budget will move into balance early in FY2009, well before the Office of Management and Budget or the Congressional Budget Office expect.
My FY 2007 and 2008 deficit predictions (okay, they were guesstimates, which should be OK, because Wesbury’s group only “suspects”) were $177 and $85 billion, respectively. Since Wesbury and I are on the same page on revenue growth, he is clearly a LOT more optimistic about spending control (after netting the Social Security surplus) than I and the CBO were. His optimism may be justified, especially in light of the fact that federal spending in the first quarter of fiscal 2007 was up less than 1% compared to the first three months of the previous fiscal year.
There is, however, one problem: By writing about it, there’s a danger the Washington pols might read what we’re saying, and decide that it’s important to do whatever they can to keep a surplus from happening.
So could you mellow out a little bit over there, Brian?
UPDATE: If you go to that October BizzyBlog post, you’ll see that 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., “raided”) 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.
UPDATE 2: At the same ftportfolios.com link, Wesbury is predicting that January’s Monthly Treasury Report, due out
sometime at 2:00 p.m. today, will show that Uncle Sam ran a $40 billion surplus in January (this article quotes another expert agreeing with that). I believe that the reported surplus will be even higher, for reasons that I’ll reveal if I’m right. :–>
UPDATE 3: Can’t let this go unnoticed (HT Club for Growth and Matt Naugle at Human Events’ The Right Angle [nice job on the name change, Matt; you're on your way to a branding empire :-->]) — Wesbury is apparently the brains behind The Economic Freedom Fund, which invests in a portfolio involving the top 20 countries in the Heritage Foundation’s Index of Economic Freedom. It’s not too much of a leap to believe that such a fund might outperform a typical international fund if the countries involved stay in the top tier of the economically free. Obviously, though, this is NOT-NOT-NOT a recommendation; you have to do all the necessary homework before you invest, and the decision to jump in or not is entirely yours.