US deficit is shrinking, balanced budget in one year?

by nukegingrich | February 21, 2007 at 01:24 pm

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"Find me a one-handed economist," President Harry Truman used to say, expressing his frustration at his economic advisers' tendency to say "On the one hand, Mr. President…, but on the other hand."

This story from Christian Science Monitor is chock full of two-handed predictions...

Despite the ongoing costs of US military campaigns in Iraq and Afghanistan, the outlook for the federal budget has grown substantially brighter.

Tax revenues are rising much faster than spending, according to Treasury Department numbers released last week. The recent trend is strong enough that, were it to continue, the budget could move into surplus in barely a year, one economist calculates.

Already, the federal deficit is shrinking toward about half the size that it has averaged since 1970, when analyzed as a percentage of gross domestic product.

The possibility of a balanced budget should be heady news for this embattled Administration, embroiled in a divisive foreign policy. And as campaign craziness season begins in earnest, look for both sides to claim credit for the improved economic situation, seeing it as either evidence that supply-side economics has worked again, and that the '01 tax-cutting program should be made permanent, OR as proof that tax-cuts should be phased out in 2010 as scheduled, and needed investments to the social infrastructure should be made.

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