Couple interesting articles in today’s New York Times. President Bush and his apologists have explained our budget deficit with their trifecta of excuses: (1) inherited a recession; (2) 9/11; (3) the media scared economy with war talk. According to a Congressional Budget Office report, the finger pointing isn’t going to fly any more:
[A] report released on Monday by the nonpartisan Congressional Budget Office estimated that economic weakness would account for only 6 percent of a budget shortfall that could reach a record $500 billion this year.
Next year, the agency predicted, faster economic growth will actually increase tax revenues even as the deficit remains at a relatively high level of $374 billion.
The new numbers confirm what many analysts have predicted for some time: that budget deficits in the decade ahead will stem less from the lingering effects of the downturn and much more from rising government spending and progressively deeper tax cuts.
. . .
The Congressional report, though, concludes that the “cyclical” problems of slower growth are a tiny part of the overall budget problem. The Congressional agency estimated that slower growth reduced tax revenues by $53 billion in 2002, accounting for a third of the budget deficit that year. In 2003, the agency estimated that subpar growth cut tax revenues by $68 billion. The overall budget deficit in 2002 swelled to $375 billion as a result of spending on the Iraq war and Mr. Bush’s tax cuts.
But this year, with the economy expanding, the Congressional agency predicted that lingering weakness would drain only $30 billion in tax revenues while the deficit hits $477 billion, less than the White House had forecast, but still a record.
Edmund Andrew’s has pulled double duty with another article examining Alan Greenspan’s changing stance on economic conditions. Despite the aforementioned federal deficit, a huge trade deficit, the falling dollar, growing personal debt, and record bankruptcies, Greenspan seems strangely “sanguine” on America’s imbalances.
Greenspan has been acting a little funny recently. From his testimony on Social Security to his commentary on variable rate mortgages; makes one wonder if something is up.