Well it's been awhile, but I've found a topic that I would like to comment on.
It is great news that our budget deficit will not meet the projections of either the White House or the CBO. There are a number of dynamics that, in my estimation, have led to this shrinking budget deficit. First of all, economists overestimate EVERYTHING. It is their nature: they will make mountains out of mole hills whether it means creating theoretical surpluses or deficits. The game of economic projection can often be volley and is often tied to the individual economist's nature and outlook rather than reason. Secondly, several tax incentives have exhausted themselves (they were only temporary tax packages that were passed immediately after 9/11 to help keep the economy from spiraling even further down in the aftermath). One such incentive for corporations could provide the federal government close to $100 billion over the next several years. And thirdly, the economy is growing more robustly and a robust economy = more tax money, as we all should know. Look at St. Mary's County: reduced property taxes, more tax revenue (due to increasing assessments and prosperity due to development associated with the base). We can debate what causes this economic growth and resulting increased tax revenues. President Bush and many of you would point to his tax plan, others would not. I will say that yes the Bush tax cuts led to increased revenue in this cycle, but in the long run, ultimately have led to reduced revenue overall (tax revenue is the smallest share of GDP in over forty years despite the increase this year). Nevertheless, this is a good development and perhaps my mode of economic thinking is wrong in this case (I do not believe that reduced taxes leads to increased revenue overall; while tax revenue indeed will increase, it will not be at the same level as it would have been had the tax rates not been reduced).
What is still wrong with this picture is that there still is a $300 billion deficit, the third largest in history. This deficit, combined with the record deficits of years before, darken our economic future and has led to a crippling national debt which is being financed by foreign governments, most notably the Chinese. We owe close to $3 trillion to foreign governments, which is a dynamic that should scare the bejesus out of all of us. Furthermore, this deficit does not include the $145 billion that the federal government is going to take from the Social Security Trust Fund this year to pay for other discretionary programs. This money should not be spent on these programs, it should be saved for future benefit payouts, but since it is being spent, it only adds to the deficit we will experience in 2017 in Social Security.
What we need in America at this point is true fiscal conservatism, and I emphasize the word "true." We do not need Howard Dean's version of "fiscal conservatism" in which health care and other added entitlement programs are more important than tax breaks, nor do we need George W. Bush's version of it in which tax breaks, mostly for wealthier earners, and increased spending for defense and homeland security are more important than reaching the black. Both sides have bastardized the term "fiscal conservative" and it's time for action to meet the label. So this is what I propose...
1) don't be satisfied if the budget deficit is only $330 billion as opposed to $430 billion
2) reduce overall government spending by 5% (we have to cut, not limit increases)...my top programs for cutting: defense, farm subsidies, Amtrak, and energy
3) delay the enactment of the 2003 Prescription Drug Benefit and scale it back substantially so that only the neediest seniors receive a benefit
4) return the tax rates for the top 2 branches back to pre-2001 levels
Hopefully with these actions taken, the federal government will once be living within its means and will start to run surpluses again. With a surplus the federal government can stop its practice of signing IOU's for the SS Trust Fund, save money for the impending crisis with entitlement programs (other action has to be taken in regards to this as well, which will further help our budget situation), and divert money to pay down our huge national debt (which helps the budget in the long run because financing the deficit is the third largest portion of this year's federal budget).
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