The US Governement Deficit is falling, why?

Question

With everyone saying we need to raise taxes, why is the budget deficit falling and has fallen over 57% year to date?

Answer 1

Because ExxonMobil paid $30 billion in taxes last year or more than 1% of the Federal budget.

Also, No Need for Tax Hikes, Surplus on Tap for 2009
Brian S Wesbury; Chief Economist
Robert Stein, Senior Economist
Date: 2/5/2007


If you think the offensive production of Peyton Manning and the Super Bowl Champion Indianapolis Colts was spectacular, you ain't seen nothing yet. When January budget data comes out this week, our models predict that tax revenues continued to surge and the federal budget will show a surplus of more than $40 billion.


This would pull the budget deficit on a 12-month moving average basis below $200 billion for the first time since September 2002 - a massive reduction from the peak deficit of $455 billion in the 12-months ending April 2004.


Tax revenues were $2.479 trillion in the 12 months ending in January 2007, a $255 billion increase from the 12 months ending in January 2006. Tax revenues have surged for almost three consecutive years now, ever since the tax cuts of 2003 stimulated a strong economic recovery.


But putting points on the scoreboard is not a guarantee of victory. The defense has to play well too. And for the budget this means spending restraint. Federal spending was $2.667 trillion in the 12 months ending January 2007, a $134 billion increase from the 12 months ending in January 2006.


On a 12-month versus 12-month basis, federal revenues increased 11.5%, while federal spending increased just 5.3%. This is great news. As long as spending growth remains in check, the budget deficit will continue to decline.


In fact, our models expect average tax revenue growth of 9% over the next three years and spending growth of between 4% and 5%. This will generate a well below consensus deficit in FY07 of just $115 billion. Next year in FY08, we forecast a deficit of only $35 billion. On a 12-month basis, we suspect that the budget will move into balance early in FY2009, well before the Office of Management and Budget or the Congressional Budget Office expect.


All of this is fabulous news for the markets. With gridlock holding spending back and the economy continuing to generate spectacular revenue growth, earlier than expected budget surpluses will significantly reduce the odds of tax hikes.

Answer 2

Bravo for noticing, you get a star! The mainstream news media will catch up to you in, oh, about the same time a Democrat takes office as President.

I propose a drinking game: take a shot every time over the next two years that some columnist writes about the "increasing deficit" that will have been decreasing for about 4 years...

Answer 3

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Answer 4

The economy has been steadily improving over the past 4 years; which has increased government revenues.

The surplus/deficit is simply government revenues - government expenses.

Answer 5

A high proportion of US citizens are in their peak earning spending years compared to other times, this aids the cash inflow to the government.

Answer 6

Because taxes have been cut.

I know this sounds strange, but cutting taxes actually increases tax revenue to the IRS. This worked when J.F.K. did it in the 60's, and when Reagan did it in the 80's.

The simple answer is... When you cut taxes, people have more money to spend and invest. When people spend more money, companies have to produce more products. The companies and their employees make more money, and actually pay more in taxes. And when people invest more money, they make more money, so they have to pay more in taxes.

When taxes are high, investors find more ways to shelter their money, thus paying less taxes. Also people have less money to spend, so the companies and employees have less profit to tax.

Answer 7

Because hysterical democrats, who demagogue the issue, have failed to influence fiscal policy,