View Full Version : Defecit TRIMMED by $100 Billion

05-04-2004, 08:47 AM
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.

Lordy lordy. There goes another Bush criticism fallen by the wayside.

05-04-2004, 10:18 AM
Spending needs to be reduced, period.

The decline in the deficit from $521B to $420B is good news. It's still to too high, and the costs of iraq (that's the entire costs BTW) should be a major concern.

If the tax cuts have been "lower than expected", then how can the tax cuts be given the credit for an improving economy?

05-05-2004, 09:00 PM
I don't know why you want to be obtuse about this md. The tax REFUNDS are lower, not tax cuts.

At the fiscal half-year mark, the end of March, the deficit was still behind projections. And there was some significant news to help explain that fact. Tax refunds were falling well short of projections, suggesting either that taxpayers had more sharply reduced their withholding to adjust for the 2003 tax cuts, or that their incomes had beaten expectations.


05-06-2004, 08:10 AM
I don't know why you want to be obtuse about this md. The tax REFUNDS are lower, not tax cuts

Refunds are a product of taxpayer overestimating their taxes, or withholding more than they owe, when they compute their tax obligation, which would reflect the tax cut.

Guess you missed this part as well.

"Treasury officials also cited lower-than-expected government spending and higher payroll and individual income taxes as reasons that less borrowing may be needed"

Clearly the revenues haven't increased, which is a plank in the reaganomics you alude to.

05-06-2004, 08:36 AM
Mavdog: Just because Tax Refunds were lower than expected does not mean that people didn't get higher tax refunds thus effecting the economy. The tax refunds issued were just not as high as was expected. If the refunds were as high as expected, imagine how much greater of a recovery we would be in than we already are.

Think positive MD, it makes living life so much better.