Deficit Watch, March 2007

The deficit for the most recent 12 months increased versus the last reading; that’s the bad news.  The good news is that the growth rate of federal tax receipts was 10.6% for the same rolling 12 months, still outpacing spending growth of 4.4%. 

I’ll lead with the same old qualifier: “If those trends continue”—then the budget would move into balance in August of 2008, just in time for the acceptance speeches at the political conventions. 

Unfortunately, I see a dark cloud hanging over the revenue trend: the slowing economy is starting to dampen the growth rate of corporate profits, which are a nontrivial 15% of tax receipts.  It’s too early to call yet, but the next three months should tell us whether the revenue growth rate is dropping enough to push budget-balance day into 2009, or later.   

That wouldn’t be anywhere near a financial problem for the federal government—but it would make the political campaigns less entertaining for me.  That’s my problem, though. 

In the meantime, I’ll start dissecting the revenue and spending totals, to see if anything of interest pops out.  (I suspect spending growth is low largely because the Katrina spending frenzy is fading into the past, but I'll confirm that before next time.)

Comments

[Bob]

Steve,

Re: deceleration of corporate profits. Two questions:

1. Do you know if the top line is slowing as well or

2. Could it be that we are just in a cyclical pause of productivity improvements?

[Steve]

Bob:
Can't tell about the top line in a timely fashion; the MTS just reports the money flowing in from corps. I hope this is just a temporary slowing of the growth rate, but it could be the end of the big jump start of the last few years.

[The Svedberg]

Can we all agree that corporation profits drive growth and then ask why that would lead to taxing corporations? Corps aren't people they don't pay taxes, they include the tax as part of the overhead. How far would prices drop immediately if corporate taxes were lifted? After doing away with the joke that are corporate taxation schemes, we should do away with the Federal Government's invasive tax Gestapo on its citizenry, the IRS. Americans spend a quarter trillion dollars on tax compliance yearly, and that's inefficient waste even government bureaucrats would be hard-pressed to accomplish. Lastly, we should revoke the 16th amendment and stop punishing people for making money and being productive. The rule of government is if you don't want it, tax it, and if you do want it, don't tax it. I choose taxing consumption over taxing production. H.R. 25 Fair Tax legislation.