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The Deficit Shrinks, Debt Remains

Lawrence Kudlow reports in the Washington Times that the improved economy, resulting from tax breaks, has led to a decrease in the national deficit.

Here's one story you won't find on tomorrow's front pages: "The U.S. budget deficit is shrinking rapidly." The headline would be accurate, but the mainstream media are much more interested in talking down this booming economy than telling it like it is.

... the 2005 deficit is on track to drop to $355 billion from $413 billion in fiscal 2004.

... Behind this really big budget story is the even-bigger story: The explosion in tax revenues has been prompted by the tax-cut-led economic growth of the last 18 months.

Kudlow noted this advantage last year in a number of articles on supply side economics (here are my comments on one).

Powerline's Deacon, quick to the draw, comments:

It appears, then, that the Bush deficits were product of the recession he inhertied and the slowdown caused by 9/11. Similarly, it appears that the Bush tax cuts, by stimulating the economy, has produced an explosion in tax revenues that is causing the deficit to narrow significantly.

This good news means that our national debt is not growing as quickly as expected and that the debt "crisis" is not at the level Bush antagonists anticipated. I hate to be negative amid improved economic news but the reduction in the deficit still equates to a massive increase in public debt to the tune of $355 billion. Yes, this is a lot better than the expected $413 billion short-fall but it is still a significant unbalanced budget. Kudlow writes,

If Bush managages to at least freeze the budget or actually cut it, the U.S. may be well on its way to a balanced budget:
With supply-side tax reform on the way, shrinking budget deficits, new-found spending discipline and a president determined to confound conventional wisdom by reforming Social Security, George W. Bush's second term is off to a roaring start even before he is officially sworn in next week.

Now is not the time to celebrate or to declare that the $7 trillion debt is not a crisis. Rather, tough decisions must be made to eliminate the deficit, balance the budget and rid ourselves of the looming national debt.

"The rich rules over the poor, and the borrower becomes the lender’s slave" (Proverbs 22:7)

Others blogging: BlogsforBush, The American Patriots

Posted by tim at January 17, 2005 6:36 AM

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