Who gets credit for projected smaller deficit?

Scott Tong Jul 10, 2006

KAI RYSSDAL: Also tomorrow, down in Washington, a news conference. Well, probably a whole mess of news conferences. But the one we’re interested in will feature money. Lots of money. Here’s Marketplace’s Scott Tong.

SCOTT TONG: Tomorrow morning President Bush will trumpet an event that’s usually high on the snooze-o-meter. Something called the mid-session budget review. The reason: tax receipts are on pace to rise 10 percent or more this year.

Douglas Holtz Eakin is a former budget official for the Bush White House and the Republican Congress. He says folks on Main Street and Wall Street are thriving:

DOUGLAS HOLTZ EAKIN: This appears to be across-the-board strength. Greater corporate receipts up strongly over last year. Also increases in withheld income taxes and payroll taxes.

The upshot is the federal deficit may come in around $300 billion this year, that’s down from $400 billion two years ago. How much credit does Congress get for all this? Holtz Eakin says roughly zero.

HOLTZ EAKIN: This is a money-coming-into-the-treasury story. It is not the result of extraordinary fiscal discipline on the part of Congress.

Still, the political spinning has begun. The White House budget director credits the president’s policies. But liberal groups say the situation would be even better without the Republican tax cuts. The truth, says Rudy Penner of the Urban Institute, is somewhere in the middle. Take the Administration:

RUDY PENNER: Their claims are exaggerated for taking credit for a fairly normal business cycle. On the other hand, the first tax cut couldn’t have been better timed for making it a shallower recession than it would have been otherwise.

The boost in tax receipts may be fleeting. America’s richest 5 percent pay half the taxes — and their fortunes rise and fall with the market.

In Washington, I’m Scott Tong for Marketplace.

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