Mirror of Wildernesses
More Lessons from ENRON

Two Notes on the State of the Budget

Two notes on the budget from Stan Collender. Note 1:

BUDGET BATTLES: More Needs To Be Said About The Midsession Review. By Stan Collender: [T]he new fiscal 2008 deficit estimate -- $188 billion -- would be a huge 45-percent drop from the previous year and so should be considered suspect. It is based in part on the assumption that domestic appropriations will stay flat at about $398 billion. Because $398 billion would be less than what was appropriated for 2006, the base is almost certainly too low. An additional $10 billion to $15 billion over what is being assumed should be anticipated. The 2008 deficit is also likely to be higher because expenses related to the wars in Afghanistan and Iraq will be greater than assumed.

In addition, revenues may be far less than projected. It's hard to tell for sure, but it does not appear the administration has assumed that the alternative minimum tax will be fixed in 2008, either permanently or with the same type of one-year "patch" that has been used the past few years. There is virtually no doubt the AMT will be fixed; the tax increase on those who consider themselves middle-class would be far too large a political problem. Therefore, revenues would be between $40 billion and $50 billion less than is forecast.

As much as I would like to see it happen, I have real doubts about the administration's forecast that the economy will grow by between 5 percent and 6 percent every year through 2008....

Note 2:

BUDGET BATTLES: More Needs To Be Said About The Midsession Review. By Stan Collender: [T]he politics of the budget debate were likely changed significantly by the midsession review. It's hard to see, for example, how the lower deficit numbers for 2006 and 2008 and the "problem solved" attitude displayed by the White House will encourage Congress to look more cautiously at spending. Even with a deficit hovering around $300 billion a year and a debt that is at an all-time high, many on Capitol Hill may now think they have a few more dollars to spend this year. It also may make it more difficult for the White House to stand in their way.

Last week's midsession budget rally at the White House will also make it harder for the leadership to get the Senate to adopt the budget process changes it has been pushing, because at least a handful of senators will be able to say they are not needed.