Deficit drops, Tax revenues rise, Democrats reel
The New York Times reports that an unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year.
White House officials are expected to announce that the tax receipts will be about $250 billion above last year’s levels and that the deficit will be about $100 billion less than what they projected six months ago.
On Friday, the Congressional Budget Office reported that corporate tax receipts for the nine months ending in June hit $250 billion — nearly 26 percent higher than the same time last year — and that overall revenues were $206 billion higher than at this point in 2005. Analysts say the surprise windfall could shrink the deficit this year to $300 billion, from $318 billion in 2005 and an all-time high of $412 billion in 2004. At the beginning of the year, the Congressional Budget Office projected that this year’s deficit would be $371 billion and the White House Office of Management and Budget put the figure at $423 billion.
President Bush and Republicans in Congress will assert that tax cuts of 2001 and 2003 are working and that Congress should make them permanent. Democrats will speak of volatile tax revenue changes year to year, and how the these revenues are far below historical norms (you can read this as their view of “selective” norms developed well after the income tax was enacted - 1894’s flat 2% rate).
The point here is that we’ve got quite a mess, even with this good news. Federal debt has ballooned to $8.3 trillion, up from $5.6 trillion when President Bush took office. (Republicans are trying to raise the authorized debt ceiling to $9.6 trillion).The war costs for Iraq and Afghanistan have totaled more than $300 billion since 2003. Entitlement programs, particularly Medicaid and Medicare, are climbing rapidly as a result of rising medical prices and the recent prescription drug program. Outlays for Medicare have climbed 15 percent this year and are expected to hit $300 billion. (About half of that increase results from the new prescription drug program, which is expected to cost nearly $1 trillion over the next 10 years).
We’ve got a federal spending problem. The Debt is our most serious problem and will be the undoing of our currency, economy, and way of life. This pattern has repeated globally throughout all of history in many countries. It is the last piece of a puzzle which portends economic decline and secondary world status. It is how superpowers decline.
It will be the subject of a series of entries that discuss America’s economic collapse and the rise of China.
