The shrinking budget deficit

In 2001, President Bush inherited an economy in recession. Democrats squealed that if he were to follow through with promised tax cuts, things would just get worse — that the tax cuts would reduce the amount of loot flowing into federal coffers, resulting in “deficits as far as the eye can see.”

Well, the tax cuts went through, and Democrats to date have been unable to repeal them.

So, if David Stockman, Ronald Reagan and the whole “supply-side” gang were all wrong — if “tax cuts for the rich” have made federal deficits worse than ever — why aren’t Harry Reid and Nancy Pelosi chortling, “We told you so”?

Because, in fact, “The budget deficit, once the focus of intense debate and scrutiny, is shrinking fast,” Investor’s Business Daily reported last week, “just as President Bush predicted four years ago. No wonder the media have all but stopped talking about it.”

Back in 2001, Mr. Bush “wisely ignored the misplaced warnings, cut taxes and let a surging economy fill U.S. coffers with tax revenues,” the business daily reports. “Now, surprise, surprise, the Office of Management and Budget announced in this week’s mid-session review that the deficit this year would be $205 billion, or 1.5 percent of GDP, down from $248 billion, or 1.9 percent of GDP, last year and well below the peak of $413 billion, or 2.6 percent of GDP, in 2003.”

That 1.5 percent of Gross Domestic Product, the business daily points out, is also well below the average 2.4 percent of the past four decades.

The OMB now expects a federal surplus in 2012 — though private budget watchers say if the economy stays healthy, that could happen by 2009.

Does this mean everything is hunky-dory? Unfortunately, no.

Imagine how much better off we’d be if this boom in federal revenues had been accompanied by real spending restraint in both the House and Senate.

Everyone knows the costs of Medicare and Social Security will start to spin out of control as soon as the bulk of the 76 million baby boomers starts to retire in four or five years.

The responsible thing for Congress to do right now would be to reduce or freeze government spending outright, or (at the very least) to hold the growth of federal spending to the rate of population increase, thus putting the budget into surplus, allowing Uncle Sam to actually pay down some of his debt in preparation for the coming budgetary tsunami.

Of course, our big-spending congressional Democrats (along with, more’s the shame, the bulk of their “conservative” Republican colleagues) couldn’t resist the temptation to haul back more booty to their home districts, even if that meant funding their spending spree with Daddy’s soon-to-be-tapped-out credit card.

And make no mistake, the spendthrift Congress will do its best to reverse the deficit good news next year, dumping pallets of greenbacks over the side like sailors lightening ship before a storm.

The solution? If the Democrats send the president “a 2008 budget that includes both more spending and tax hikes as promised, he should veto it,” the business daily recommends. Though the president vetoed only one piece of legislation in his first six years, “In the future, we hope he gives the pen a real workout.”

Amen to that.