And it is because federal tax revenues are increasing.

But how can that be?

I thought that the Bush tax cuts were a give-away to the rich and were creating the deficit.

At least that is what the Democrats have been assuring us -- especially during the 2006 election and in the weeks since their congressional victory.

The federal deficit has improved significantly in the first three months of the new budget year, helped by a continued surge in tax revenues.

In its monthly budget report, the Treasury Department said Friday that the deficit from October through December totaled $80.4 billion, the smallest imbalance for the first three months of a budget year since The budget year ends Sept. 30.

Tax collections are running 8.2 percent higher than a year ago while government spending is up by just 0.7 percent from a year ago. Last year's spending totals were boosted by significant payments to help the victims of the Gulf Coast hurricanes.

The Treasury said for December, the government actually ran a surplus of $44.5 billion, the largest surplus ever recorded in December and a gain that reflected a big jump in quarterly corporate tax payments.

The $80.4 billion deficit for the first three months of the current budget year was down 32.6 percent from the imbalance for the same period a year ago of $119.4 billion.

For the year, analysts are still forecasting that the deficit will worsen from last year's total of $248.2 billion, which had been the lowest in four years.

The Congressional Budget Office is forecasting that the deficit for the 2007 budget year will rise to $286 billion, an increase of 15.2 percent from last year, but that figure could be lowered when the CBO releases its revised estimate later this month.

In other words, we have pessimistic estimates of the budget deficit, based upon worsst-case scenarios. But then this ugly little thing called reality kicks in, and shows us once again that lower marginal tax rates produce higher tax revenues. It was true under John F. Kennedy. It was true under Ronald Reagan. And it is true under Geerge W. Bush.

But don't worry, folks -- the Democrats will do their best to raise taxes on every American and kill the goose that laid teh golden egg. After all, that is their standard approach to economics -- because they are the bastion of the "Out-Of-Contact-With-Reality"-Based Community. The Pelosi/Reid Recession is just around the corner!

Posted by: Greg at 07:09 AM | No Comments | Add Comment
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