A tamed US deficit, but can it last?
At $205 billion, the 2007 deficit is expected to be half its '04 peak, as corporate tax revenues surge.
from the July 13, 2007 edition
Page 3 of 3
Looking farther ahead, the nation still faces a huge budgetary crunch when members of the baby boom generation begin retiring in large numbers, sending up the costs of Social Security, Medicare, and other entitlement programs.
President Bush has threatened to veto some fiscal 2008 appropriations bills now working their way through Congress, saying, overall, lawmakers are on track to spend about $23 billion more than he requested in his budget. Yet that $23 billion is less than half the amount the US will spend next year on the Medicare prescription drug benefit alone.
"Virtually all budget analysts, including those in the administration, agree that current tax and spending policies are not sustainable in the long run," says an analysis of the mid-session review by the Center on Budget and Policy Priorities.
Economists often measure the importance of federal spending and receipts by their size relative to that of the whole economy. This gives them a feel for how well the US can bear its fiscal burdens, they say.
And as a percentage of the nation's gross domestic product, the current deficit is manageable, according to the White House. This year's estimated shortfall of $205 billion will come in at 1.5 percent of GDP, lower than the 40-year average of 2.4 percent.
Meanwhile, at an estimated 18.5 percent of GDP over the next five years, tax receipts are projected to remain above the 40-year historical average of 18.3 percent.
In this context, Bush hit Democrats as threatening US economic progress by allowing his tax cuts to expire.
"We've shown what works," said Bush at the budget event.
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