In its Mid-Session budget review last week, the White House ballyhooed the good "news" that the FY 2007 federal budget deficit projection was down from OMB's original February forecast of $244 billion to a revised $205 billion.

But looking out the next five years, the muted Mid-Session story is of unmitigated worsening news on the deficit front. The deficit projected for FY08-FY12 was actually higher than what was originally forecast -- by $137 billion.

And bear in mind that this figure is based on White House assumptions that the Iraq war will cost nothing after next year and that the Alternative Minimum Tax will be neither patched nor reformed, let alone repealed (or offset entirely). So, as bad as this $137 billion dollar is, it is widely seen as farcical -- farcically low.

The evidence keeps piling up that the budget deficits aren't increasing interest rates and aren't harming the economy. But deficits aren't just an economic problem- they're a moral problem, says economist Andrew Samwick:

Suppose for the sake of argument that deficits don't put much upward pressure on interest rates. Even in that case, they still have to be financed at the existing interest rate, and the burden of financing them has to be borne by someone in the future. Taxing someone in 2020 to pay for our spending binge in 2003 violates my notions of fairness, and that is a substantially more salient issue here than any additional concerns about efficiency.

Hold on there- that's a bit too simple.

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Posted by Matt Lewis, 11:24:07 AM

Monday, July 09, 2007

Congress is back from its week-long July 4th vacation and will, among other things, try to get pass some more spending bills. This week in the House:

Wednesday

• Transportation-HUD is in full Appropriations Committee
• Labor-HHS is in full Appropriations Committee

Thursday

• Commerce-Justice-Science is in full Appropriations Committee
• Energy-Water pork is divvied up by Appropriations Committee

Possible action sometime during the week

• Defense is in subcommittee
• Agriculture is in subcommittee

The Senate Appropriations Committee takes up Financial Services and HUD sometime this week

The federal government incurred a deficit of $123 billion for the first nine months of fiscal year 2007, CBO estimates, $83 billion less than the shortfall recorded during the same period in 2006. Revenues have risen by more than 7 percent, whereas outlays have grown by less than 3 percent. Both rates of growth are noticeably smaller than the rates of increase in fiscal years 2005 and 2006, which averaged about 13 percent for revenues and close to 8 percent for outlays.

(click on CBO logo for report)