What a spate of good economic news we have had the past week. The state treasury is flush, having accumulated a surplus of $400 million in the fiscal year that ended at the first of the month, and the U.S. Treasury reports that a rush of income-tax receipts this year will drive the federal budget deficit for 2006 much lower than the administration’s last forecast in February.
President Bush boasted yesterday that the four rounds of tax cuts that he has engineered are responsible for the gushing revenues in government treasuries. It proves, he said, that his theory that lower taxes raise government revenues while releasing furious economic growth was right.
We can rest easy now, can’t we? We can quit worrying about exploding deficits and soaring debt financed by foreign banks and the oil cartel or an economy that is not producing many new jobs or growing paychecks.
Restrain your exhilaration. Let’s pay closer attention to those exuberant claims.
First, real per-capita federal revenues — adjusted, that is, for inflation and population growth — are only now returning to the level of five years ago when Congress enacted the first of the Bush tax cuts and a brief recession began.
Even counting the administration’s projections for this year, the growth rate of revenues in the five and a half years of the administration is far below the rate of any previous business cycle since World War II. The new revenue forecast for this fiscal year is still $300 billion below the forecast in 2001 under the tax rates that governed the latter Bill Clinton years.
Much of the furious growth in revenues this year, in Washington and in Little Rock, is from corporate income taxes. Surging corporate taxes account for almost a fourth of the Arkansas surplus. It reflects a mammoth surge in profits that corporations choose to report this year. It also reflects a surge in capital-gains and dividend income from wealthy investors and the large bonuses and salary increases of corporate executives rather than a rise in the incomes of average Americans.
The figures suggest a rapidly widening income disparity between corporations and high-income individuals and the rest of society.
Last, let us be reminded that in the five and a half years since the first tax cuts for the wealthy were enacted, in March 2001, the Bush administration has borrowed $3 trillion. Even with the burst of revenues in recent months, counting the administration’s borrowing from Social Security trust funds to pay for wars, it will add $470 billion this year to the debt that our children and grandchildren will be taxed to pay.
When this all began in 2001, remember, the United States was running 12-digit surpluses and forecasting ever-larger ones as far as the eye could see. When politicians brag, memory helps.
