It would be interesting to see how the deficit would be doing if it weren't for the war on terror spending that was forced on the country after 9/11. AND IF PRESIDENT BUSH HAD NOT INCREASED DOMESTIC, NON DEFENSE SPENDING DRAMATICALLY.
But, the least one can say is. . . . cutting taxes does not seem to have ruined us yet. The Times, however, can't really get enthusiastic about it.
For one thing, analysts note, federal spending has continued to climb rapidly, about 7 percent this year. Despite cutbacks in many domestic programs, spending has surged for the war in Iraq as well as in certain benefit programs providing health coverage.
In addition, while a lot of the increase in tax revenue flows from the improving economy and higher incomes, part of the jump stemmed from a special factor: the expiration of a temporary tax break that allowed companies to write off their investment in new equipment much more rapidly than normal.
That tax break reduced revenue by about $61 billion in 2004, but it merely postponed taxes that companies would have to pay once their equipment was fully depreciated.
Other financial hurdles may be down the road. Mr. Bush's intention to extend his tax cuts indefinitely, and to add new ones, would drain more than $1.4 trillion from government coffers over the next 10 years.
As the Medicare expansion into prescription drugs begins to take effect, the cost is estimated at about $33 billion in 2006, with increases every year after that. In 2015, the annual cost of the program is expected to be about $137 billion.
A senior White House official cautioned that it was too early to make definitive judgments about whether the tax cuts had fulfilled the promises of "supply side" economics, a Reagan era concept that posits a direct relationship between lower tax rates and faster economic growth.
"We need to wait for more data," said Ben S. Bernanke, who took over this month as chairman of President Bush's Council of Economic Advisers, at a conference on Tuesday at the American Enterprise Institute.
But Mr. Bernanke said the tax cuts had undoubtedly contributed to economic growth, which in turn bolstered tax receipts.
"One consequence of strong income growth is that we are enjoying higher-than-expected levels of tax collections," he said.
The Times suggests that the President's future tax cuts would take 1.4 trillion out of the budget over the next 10 years. But in the sentence right above that they note that the first tax cut "reduced revenue by about $61 billion in 2004, but it merely postponed taxes that companies would have to pay once their equipment was fully depreciated."
Given that the deficit has shrunk by nearly 100 billion, doesn't that mean that there has been a positive cash flow for the government by lessening taxes? So, maybe 1.4 trillion in tax cuts will produce well over 2 trillion in tax revenues.
JUST A THOUGHT
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