Taxes Cut, Economy Up, Deficit Down...

Coincidence? I think not.

The Washington Times' David Lambro crows as "voo-doo" economics works once again.

We hit a record $412 billion deficit in the 2004 fiscal year, up from $378 billion in 2003 and $158 billion in 2002. Four months ago, administration officials forecast a $427 billion deficit for this year.

As a result of Treasury's latest surplus figures, Wall Street analysts now project this year's deficit will be around $370 billion, possibly as low as $365 billion, maybe lower if economic growth picks up later this year.

Lambro admits that the size of the deficit is considerable but, relatively speaking, it's no where near as high as the deficits of the 1980's when you look at it as a percentage of the size of total GDP. So what happened? Supply-side economics, of course. It worked in the 1960's, in the 1980's and it's working again.

There's an important lesson to be learned from the fed's declining deficit figures: An expanding economy is the only way to shrink the deficit, and lower tax rates spur faster economic growth. That is what led to last week's lower deficit projections and a temporary surplus in revenues.

Another lesson: Don't listen to the pessimists who wrongly predicted a fiscal and economic disaster from the deficits that never materialized. The deficits were largely the result of the war on terrorism costs that followed the September 11, 2001, attacks and the following economic dislocations that and sharply cut federal and state tax revenues.

As any business knows, when costs rise and revenues fall, you end up with a loss or deficit. We recovered relatively quickly from all that, thanks to hard-working Americans and a resilient economy. Interest rates did not soar as some predicted. The economy did not worsen, as others said. Unemployment did not climb, it fell, and the American economy got back on track.

Damn, it must drive Democrats crazy.

Posted by: Gary at 04:35 PM | No Comments | Add Comment
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