Tuesday, July 19, 2005

The Budget: Who gets credit?

Republicans are bragging that the budget deficit has come in $94 billion less than expected. Yes, this is acutally a good thing. And, yes, while this is great news, this isn't because of successful Bush economic policies, as the Republicans would like you to believe.

In fact, most of the good news is due to an increase in the collection of corporate taxes. Yep, that's right. Corporate Taxes. While taxes may not be very interesting, just hear me out.

As CFO.com says that because of a tougher IRS, collected corporate taxes climbed nearly 44 percent in 2004, to $189.4 billion. Those increased collections could help narrow this year's budget deficit by as much as $90 billion (to $325 billion).

The Bush Administration gives much of the credit to economic growth resulting from the president's massive first-term tax cuts, but experts say that other things like the one-year tax "pardon" which is designed to encourage U.S. corporations to send back money they earned abroad.

So we see that the good news isn't due to any changes in our economic outlook, it's due to one-time changes and a tougher IRS. Speaking of which, improved IRS enforcement has long been a key goal of Senator Conrad's.

Unfortunately, this good news won't last.

Here's why: At the end of the day the Congressional Budget Office in D.C. warns that large deficits after 2008 will likely be unchanged.