Most observers probably missed it, but President Bush and the Republicans in Congress scored a significant victory this week. The latest economic numbers show the federal deficit is at a four-year low, thanks to higher than expected federal revenues. Bush correctly points out that this cash infusion is a result of his hard-fought tax cuts.
In a news conference this week, the president said he had already made good on his 2004 promise to the American people to cut the deficit in half over five years. “Today I'm pleased to report that we have achieved this goal, and we've done it three years ahead of schedule,” he said. The President went on to point out that the deficit is lower than it has been for 18 years. It was the tax cuts, said the President, that helped make this happen.
“Tax revenues grew by $253 billion in 2006,” said Bush. “That's an increase of 11.8 percent. Over the last two years, we've seen the largest back-to-back increases in tax revenues ever, and the largest percentage increase in 25 years. In other words, when you put policies in place that cause the economy to grow, tax revenues increase.”
The President and his Republican backers in Congress deserve credit for getting it half right. Indeed, the tax cuts helped spur a higher than expected growth in federal revenues this year. But meanwhile, as analyst Stephen Slivinski points out on the Cato at Liberty Website, the other side of the equation – the growth of government spending – has not slowed.
“Although the deficit is certainly smaller, it’s not because the White House and Congress suddenly have a newfound respect for spending discipline,” writes Slivinski. “Federal spending grew in excess of 7 percent this fiscal year. That’s faster than the expected growth in GDP of 6.5 percent…And unfunded liabilities of entitlement programs continue to grow. Remind me again how this is progress?”
Slivinski is right to point out the elephant in the room: Medicare and Social Security. In only two years the baby-boomer generation will begin retiring and start to strain an already burdened entitlement system. According to the Senate Budget Committee, “Long-term entitlement obligations will overwhelm federal resources when Baby Boomers retire. Within the next 75 years, federal obligations will cost U.S. taxpayers $46.4 trillion. To put that in perspective, our nation has collected $40 trillion in taxes over the last 217 years combined.”
Tim Chapman is the Director of the Center for Media and Public Policy at The Heritage Foundation in Washington, D.C. and a contributing columnist to Townhall.com
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