Note: This post has been moved near the top for the rest of Tuesday.
US Tax Revenues Up 9.7% through four months, Deficit Down 57%; US Media Outlets Mostly Ignore the News
Both Brian Wesbury at FT Portfolios and yours have to confess to being wrong so far this year on revenue growth. We both have been thinking (Wesbury here, BizzyBlog here) that itâ€™s going to come in at 9%, but as you see, through four months itâ€™s actually pushing 10%.
Even with spending control slipping a bit (up 6.4% in January 2007 compared to January 2006), the deficit is 57% lower through the first four months of FY07 than it was at the same time in FY06. I believe that merits a “Wow.”
There is a very real possibility that the federal budget will be in a surplus situation when President Bush hands over the keys to the White House in January 2009. Four months ago, I first suggested that it might very well happen. Brian Wesbury now agrees. The Skeptical Optimist has seen this happening for an even longer time. (Update — SkepOp’s latest post [Feb. 13; HT Ironman in comment below] is projecting that the budget is on track for balance in June 2008.)
While there is some coverage of the budget news — this Yahoo! search at about 6:30 a.m. this morning on “federal deficit” (without quotes) has about 20 citations in the first 70 listings going back to the time of the yesterday’s Treasury release — there is no disputing its relatively muted treatment. The online versions of the New York Times, Washington Post, and USA Today do not have links to the news on their home pages, or even on their business section home pages (USAT does have an “On Deadline” blog entry). The Times has a fairly long article (may require registration) comparing the current expansion, which started in 2003, to the early years of the Clinton economic expansion, but does not bring out yesterday’s news about the shrinking deficit.
ABCnews.com? Nope (not on home page or at Money & Business). MSNBC? Get real (“New evidence bolsters teen driver training” is apparently a more important home-page business story listing; there is no mention of the Treasury release on MSNBC’s business page). CBSnews.com? Surely you jest (not on home page or business page). Fox? Sorry (not on Main, Business, or “U.S.” home pages).
BBC apparently believes that the falling US deficit is of more interest to its British readers than the formerly Mainstream Media believes it is to US news consumers.
Again, what happens if a deficit falls and almost no one reports it?
Cross-posted at NewsBusters.org.
UPDATE: Welcome Instapundit readers!
UPDATE 2: TaxProf has a great chart showing how capital gains realizations/reported, and capital gains taxes collected, ballooned after the 1997 capital gains tax rate cut from 28% to 20% (many of you didn’t know Bill Clinton was a closet supply-sider, did you? Now you know real reason why the late 1990s were prosperous.) — and then again in 2004 after the 2003 Bush-led rate cut to 15%. 2005 and 2006 data will almost undoubtedly show similar results.
More important than the taxes collected is that average annual reported capital gains subject to taxation TRIPLED from 1990-1996 to 1998-2004 (I do not know why 1997 is not included).
An even cooler number (one that isn’t available at the PDFs linked at TaxProf, would be the annual gross proceeds from all of the asset sales that gave rise to those gains. I would expect that it is a multiple of the gains alone that were subject to taxation. Why would those numbers be important? Because the increases in annual gross proceeds would represent capital deployed to a higher use that would likely have stayed locked in before tax rates were lowered. To the extent that capital is redeployed to better uses by people who know what they are doing, that should lead to greater innovation and higher economic growth.
UPDATE 3: In response to the many commenters and trackbackers concerned that the Formerly Mainstream Media will attempt to portray a return-to-surplus situation as something the new congressional majority is entitled to credit for when it comes — Be ready with these responses, and in fact plant the seeds now where needed:
- Anything that happens in the economy and with the federal budget between now and September 30, 2007, will be affected by the budget passed by the 109th Congress and agreed to by the Bush Administration. The new Congress will only have an impact if it takes specific action that affects the CURRENT fiscal year.
- Anything that happens in the economy and with the federal budget during the next fiscal year that will end September 30, 2008 will be affected by both the 110th Congress and the Bush Administration — not necessarily in that order.
UPDATE 4: American Shareholders Association’s blog is predicting further cap-gains windfalls.
UPDATE 5: I’ve said it a lot before, but I’ll say it again for those who are new here. This is from yesterday’s post that went up before the Treasury report was released:
If you go to this 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.