WASHINGTON (MarketWatch) -- The Congressional Budget Office on Thursday estimated that the federal deficit will narrow to $260 billion in the current fiscal year, down from $318 billion in fiscal 2005, amid surging tax revenues.
The new figure, contained in CBO's annual summer budget update, is $112 billion lower than the nonpartisan agency's March projection. The $260 billion figure matches an estimate contained in a monthly CBO report released a few weeks ago.
"Higher-than-anticipated revenues, mostly from individual and corporate income taxes, account for the bulk of that improvement," the CBO report said.
Measured against the economy, the 2006 deficit is equal to around 2% of gross domestic product, down from around 2.6% in fiscal 2005. In nominal terms, the deficit hit an all-time high of $412 billion in fiscal 2004, a figure equal to 3.6% of GDP.
Acting CBO Director Donald B. Marron told reporters that the updated figures show the federal deficit has been reduced to a "sustainable" level.
"We have gone from a period in which the fiscal deficits we were running in this country were large and not sustainable if they had persisted to a situation in which at least now and next year, for several years going forward, the deficits appear to be in a range that they are sustainable -- not to say that they are good or bad," Marron said.
So much for the insistence by liberals that tax cuts cause deficits. As long as we're on the correct side of the Laffer Curve (and we were when Bush introduced his tax cuts in his first term) tax cuts increase tax revenues. This is an undeniable fact, yet Democrats would have you believe it isn't true. They'd have you believe that Bush's tax cuts have increased the deficits. They haven't. The Democrats are fibbing because they want to keep more money in the government rather than letting it stay in the pockets of the people.
What this country needs to do now, if we are interested in keeping the federal deficit shrinking, is cut spending. The only thing keeping the federal deficits from growing now is the fact that spending growth is being outpaced by increases in tax revenue:
Clearly, the next step for fiscally responsible leaders is to cut back on spending growth. And if we're truly interested in curbing spending growth we need to focus on entitlements. All this stuff about "porkbusting" is nice (certainly earmark spending is a problem), but the sort of spending we need to address is entitlement spending which absolutely dwarfs earmarks in terms of scope and waste. We are spending approximatley $3 billion/day on the big three entitlements (Social Security, Medicare and Medicaid) and that spending is growing at a rate of about 8% annually.
Clearly, this is unsustainable.
Sadly, there aren't any Democrats (and not many Republicans) who are willing to take on entitlement spending. Far too many political leaders like the idea of using pork/entitlement spending to pander to certain special interest groups. That mentality has got to end for the sake of this country.