Long-projected deficit decline a “surprise” to NYT
The NYT reported: “Surprising Jump in Tax Revenues Is Curbing Deficit.” For many of us, there has been no surprise at all. For example, as far back as July of 2003, Congress forecast that the deficit would be about where it is today as a percentage of GDP. The White House as well has been long-forecasting a glide path of decline of budget deficits as a percentage of GDP:
That this glide path of deficit declines has been long predicted and observed appears to have been a surprise to the NYT. Larry Kudlow, Powerline and others have all written extensively and well about the slanted NYT coverage of the news that the deficit is coming down a little faster than projected. We will confine our remarks to one particularly misleading element in the NYT report:
Despite almost five years of economic growth, individual income taxes — the biggest component of federal tax revenues — have yet to reach the levels of 2000. Even with surging payments for investment profits and business income, individual tax payments in 2005 were only $972 billion — below the $1 trillion reached in 2000, even without adjusting for inflation.
What the NYT says is factually true, but deeply misleading. The reason that individual tax receipts were so high in 2000 — over $1 trillion — was the stock market and internet bubble. Taxes paid on capital gains in 2000 exceeded $127 billion, almost three times the level of a couple of years later. This is one important reason that total tax revenues have exceeded the levels of 2000 only for the past couple of years. It was the year 2000 that was the exception, not the last few years; the NYT creates the misleading impression that the facts are the opposite of what they really are. You may decide for yourself whether the Times’ partisan perspective plays a role in such reporting.
The trend is clear, and has been predicted for years: budget deficit declines, both absolutely and as a percentage of GDP. There is no surprise in that, even if the absolute numbers are either above or below the trend line for brief periods. Keep in mind the order of magnitude of the numbers we are dealing with. The current annualized GDP of the United States is over $13 trillion, an unimaginable figure. Tax receipts are $2.4 trillion or so. It sounds amazing to say, but a $100 billion difference in a period’s tax receipts are almost rounding error in an industrial behemoth the size of the United States.
August 27th, 2006 at 1:01 pm
[...] Right this second, the US economy GDP is running at the rate of about $13,000,000,000,000, and current deficits are small and manageable, though you’d never know it from reading the government’s own press releases or articles in the MSM. We wrote about this previously when long-forecast reductions in the deficit came somehow as a surprise to the NYT. But the NYT is not alone in spreading surprise, consternation and economic illiteracy. You certainly can’t figure out what’s going on from the AP’s economic reporting either: The federal deficit this year will be less than previously forecast but will total $1.76 trillion over the next decade, and could be double that estimate if President Bush’s tax cuts are made permanent, the Congressional Budget Office said Thursday. The $260 billion deficit forecast for the current budget year, which ends Sept. 30, is $112 billion below the office’s last estimate, in March….But the CBO forecast the improvement as short-lived, projecting the gap between revenues and spending will rise to $286 billion in 2007 and total $1.76 trillion over the next decade. [...]