‘Hug a Liberal Economist’ Day Is Now a Full Week (CBO Releases Results Early; April Tax Receipts Shatter Previous Record)

Thanks to the Congressional Budget Office (CBO), our liberal economist friends will have to deal with the tremendous news about federal tax collections, the deficit, and the validations of a core argument for supply-side economics for a full week.

On Friday, the CBO spilled the beancounters’ beans (PDF report is available at the link) in advance of this next Thursday’s release of the Monthly Treasury Statement. The coverage of CBO’s report has been very light.

Excuse me if I question CBO’s timing.

But first, the news — The report by Andrew Taylor of the Associated Press (HT Right Angle Blog) has all that’s needed to essentially finish this month’s look at the deficit:

Impressive tax receipts bring in ‘low’ deficit of $150 billion
Saturday, May 05, 2007

Washington - The federal budget deficit could go as low as $150 billion this year, congressional analysts said Friday.

The nonpartisan Congressional Budget Office had earlier seen a deficit for 2007 of about $200 billion, but continued strong revenue growth has led CBO to lower its estimates.

….. Impressive tax receipts during the April filing season prompted the more optimistic estimates. This year’s April receipts ran $70 billion higher than last year’s. CBO says receipts are likely to grow at a 9 percent pace over the first months of the budget year.

Through the first seven months of the budget year, which ends Sept. 30, the government posted an $83 billion deficit, about $100 million less than during a comparable period last fiscal year.

The $70 billion revenue increase and the $83 billion deficit mentioned in Taylor’s report, plus CBO’s note in its report that April’s surplus was $176 billion, are enough info to enable an update of a chart of what has happened during the first seven months of the government’s fiscal year (the final numbers will differ by very small amounts):

Last Monday, Brian Wesbury anticipated (in the second paragraph at the link) that total April receipts would be $390 billion, or 18% (about $60 billion) above the previous record achieved in April 2001. Collections came in slightly lower than Wesbury expected, but still shattered that previous record by well over $50 billion.

Safely assuming that the actual MTS report coming out Thursday has only tiny changes to the above, here’s a quick analysis:

• Spending — Up 3.4% for the year. The spending increase for the month of April looks bad, but it was expected to go up a lot. That’s because April 2006’s spending was lower than most months before or after it in fiscal 2006. The 3.4% increase in spending for the fiscal year thus far is still below the 5%-plus level I used when I predicted that this year’s deficit will be $177 billion. It would be nice to think that the rate of increase won’t be higher by the end of the year, but it’s probably more realistic to expect it to come in a 4.0% - 4.5%.
• Collections — Up 11.3% for the year. Taylor failed to note the number ($385 billion) and the status (all-time record) of April’s collections. Thanks to those record collections, receipts in this fiscal year thus far are up by a lot more than the 9% I was using. It would be nice to think that the 11%-plus increase will hold for the rest of the year, but even 10% would be impressive.
• The Deficit — Down 55% compared to this time last year. The numbers through seven months would seem to point to a full-year deficit that will probably be lower than even the CBO’s revised number of $150 billion. Replicating last year’s $64 billion deficit during the final five months of last year would lead to a full-year deficit of $147 billion, and the trends heading into this year’s final five months appear to be much more favorable.

Now to the timing: Let’s just say that it’s mighty convenient that the CBO released its report on a Friday, when the House was not in session and the Senate convened for all of 51 minutes. It’s also quite convenient that CBO didn’t mention that April’s collections were an alltime record in its report.

If the “nonpartisan” CBO’s goal was to get minimal news coverage, it succeeded nicely, as a late Saturday evening Google News search on “CBO deficit” (without quotes) showed only 48 news articles (that’s very low for a national story on the economy and the deficit). I did a search on “Congressional Budget Office” at the Times and found nothing relating to this story. The Washington Post did carry Taylor’s AP story online Friday afternoon, but I found no mention of it in the Saturday’s “print edition” section of its web site.

Now that CBO has gotten the April budget info out early, I would not bet against the following: When the Monthly Treasury Statement is finally released on Thursday, it will be considered “old news,” and it to will be virtually ignored.

Nevertheless, your liberal economist friends will know about April’s report on Monday morning (You WILL tell them if they somehow missed it, won’t you?) — which is why they’ll need hug and/or a shoulder to cry on. Do what you can as they struggle to accept April’s huge vindication of supply-side economics’ central tenet that, within a relevant range, decreasing marginal tax rates increases tax receipts.

Cross-posted at NewsBusters.org.

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UPDATE: Early on Friday, even before the April deficit news was generally known, Investors Business Daily chronicled the remarkable performance of the past four years, and had a warning (bolds are mine):

Today, some signs point to slowing. All the more reason to keep Bush’s tax cuts, the engine of our prosperity. But the new Democrat-led Congress has threatened not just to roll back Bush’s cuts, but to impose new taxes that would sink the economy.

A recent study by economists Tracy Foertsch and Ralph Rector for the Heritage Foundation found that letting Bush’s tax cuts lapse in 2010, as they are scheduled to do, would cost the U.S. $75 billion in GDP each year, kill 709,000 jobs and slice $200 billion from real personal income. It’d be a crime to let that happen.

George W. Bush’s economic miracle is both real and sustainable. Too bad he won’t get credit for it until the current generation of biased journalists and academics has retired.

Avoiding new taxes would be good. Another tax cut would be much better.