Good economic news
This week, the White House will revise its fiscal year 2006 budget deficit estimate to roughly $300 billion, a significant reduction from its January forecast of $423 billion. This will continue the White House’s pattern of very conservative estimates.Our calculations suggest that the federal budget deficit this year will be approximately $260 billion. This is down from $318 billion in FY-05 and $413 billion in FY-04.
Strong gains in tax receipts have overwhelmed increased federal spending. Congressional Budget Office (CBO) data show that federal tax receipts during the nine months ending in June were 12.8% above the same period in FY-05. Withheld income taxes increased 9% in June from last year; non-withheld income tax payments surged by 20%, while corporate tax receipts grew by 17%.
If federal receipts continue to grow in a similar fashion during the final three months of this fiscal year, they will climb to an all-time high of $2.4 trillion dollars, $275 billion above last year, $400 billion more than in 2000, and equal to 18.5% of GDP.
Federal spending is on track to increase 9% this year, and will end the year at 20.7% of GDP, up sharply from the 18.4% share in 2000. If federal spending had remained at 18.4% of GDP this year, the US would have recorded a small surplus of $21 billion.
It seems to me that despite all the whining from both the left and the right, the budget is in pretty good shape. Tax receipts at 18.5% of GDP is a trifle high for my liking, and deficit growth may be a bit to slow to sustain the needed monetary growth for a growing economy, but these are small issues. The fundamentals look pretty darn good.
