US Deficit Shrinks

A vindication for tax cuts?: "...a surge in tax receipts has offered some encouragement. For the first eight months of this fiscal year, the government ran a deficit of $272 billion. That's down from the $346 billion deficit for the same months in fiscal 2004. Receipts were up 15 percent from last year.

While that revenue surprise won't cure the nation's overspending problem, it has set off a flurry of budget speculation. A number of economists are lowering substantially their estimates for this year's deficit. Ed McKelvey, an economist with Goldman Sachs, for example, revised his forecast of the fiscal 2005 deficit to $350 billion, down from $412 billion.

...Is this spring's revenue surprise the start of a supply-side surge? Supply-side economists certainly think so. They point out that, under Bush, top tax rates on dividends have been slashed from 30.6 to 15 percent and on capital gains from 20 to 15 percent. That should encourage more people to invest, they argue.

But others are skeptical that the Bush tax cuts do much besides giving a short-term boost to the economy."