Link to article:
http://www.washingtonpost.com/wp-dyn...-2004May3.html
Quote:
Federal Deficit Likely to Narrow By $100 Billion
Tax Receipts Pare Borrowing
By Jonathan Weisman
Washington Post Staff Writer
Tuesday, May 4, 2004; Page E01
Smaller-than-expected tax refunds and rising individual tax receipts will pare back federal borrowing significantly for the first half of this year and could reduce the $521 billion deficit projected for the fiscal year by as much as $100 billion, Treasury and congressional budget officials said yesterday.
The Treasury Department's borrowing estimates may prove to be more good news for President Bush on the economic front, as opponents attempt to make his fiscal stewardship a campaign issue. The $184 billion the government is now expected to borrow through June is a 27 percent improvement from Treasury's February projection of $252 billion, the department said.
G. William Hoagland, a senior economic aide to Senate Majority Leader Bill Frist (R-Tenn.), said he dashed off a memo to GOP leadership predicting the 2004 deficit could be trimmed to $420 billion, a record in dollar terms but considerably lower than the White House's $521 billion projection.
"This is better than what everybody expected," Hoagland said.
Democratic and Republican budget aides in the House warned yesterday that it was too early to reach conclusions. Spending could still take an unexpected jump because of surging hostilities in Iraq. The improving federal borrowing picture, they said, may just be bringing the administration's $521 billion deficit forecast more into line with the $477 billion deficit predicted by the nonpartisan Congressional Budget Office, Capitol Hill's official budget scorekeeper.
Individual disappointments last month could prove to be to the government's fiscal advantage. Earlier this year, Bush had boasted that this year's average income tax refund would be $300 larger than it would have been without last year's tax cut. But refunds have fallen well short of that mark. Treasury officials also cited lower-than-expected government spending and higher payroll and individual income taxes as reasons that less borrowing may be needed.
All of this indicates that the improving economy is beginning to slow a three-year slide in overall tax receipts.
"The 5.5 percent average [economic growth] pace in the latest three quarters was the largest since 1984," said Mark J. Warshawsky, assistant Treasury secretary for economic policy, in a statement to the department's borrowing advisory committee. "With the assistance of tax cuts, growth has become self-sustaining."
An improving picture could strengthen the political hands of the president and House Republican leaders as they wrangle with the Senate over more tax cuts and a budget blueprint for the fiscal year that begins Oct. 1. For weeks, the negotiations have been stalled, with a majority of the Senate demanding new procedural hurdles for further tax cutting and the House and White House steadfastly refusing.
The latest compromise would mandate that tax cuts over the next three years be offset by equal tax increases or spending cuts, unless 60 Senate votes could be mustered to set the restriction aside. However, under the compromise being floated, some tax cuts -- $92 billion worth in 2005 -- would be exempted from that restriction under Congress's annual budget resolution.
So far, House tax cutters have been undaunted by federal red ink. Last week, lawmakers in both parties voted overwhelmingly to make permanent Bush's tax cuts for married couples, a bill that would cost the Treasury $105 billion over 10 years. For the next three weeks, the House has scheduled successive votes on more tax cuts totaling hundreds of billions of dollars.
© 2004 The Washington Post Company
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So I am wondering what this was. It seems the economy must be improving for this to hold true. Is the economy turning around on it's own or can you attribute this to the tax cuts? I know what the administration will say.
When I saw the final tax cut that was passed, I thought it was too small to make a difference. I am a person who truely believes that you can cut taxes and make overall tax receipts go up. In the case of the Bush tax cuts, I just did not think they were enough to force investments that would expand the economy. Personally, I wish the cuts were accompanied by cuts in spending (outside of security and defense which are not realistic at this time). That would have a nice effect on the deficit.
What are your thoughts? What do you think of the tax cuts and their effect on tax receipts? At what point is a deficit too big?