Incredible Shrinking Deficit, II

2004: $413 billion
2005: $318 billion
2006: $248 billion
2007: $158 billion

Close readers of this column may recall the top three numbers in the list above from our editorial of July 12, "Incredible Shrinking Deficit." It commented on the mid-session review released by President Bush's Office of Management and Budget, which projected the fourth number, the 2007 federal budget deficit, at $205 billion. Yesterday, the Congressional Budget Office released its own updated estimate for 2007, $158 billion, a deficit even smaller than the White House's July figure. The CBO yesterday also released its latest estimate of the 2007 deficit as a percentage of the Gross Domestic Product, allowing us to update another list of deficit numbers:

2004: 3.6%
2005: 2.6%
2006: 1.9%
2007: 1.2%

The CBO's estimate of the 2007 deficit at 1.2% of GDP is significantly lower than the White House's July estimate of 1.5% of GDP, which we used back in the July 12 editorial, and well below the 40-year average of 2.4%. In other words, the case is stronger than ever that President Bush's tax cuts, rather than creating a budget deficit, are fueling economic growth that is swelling federal revenues and shrinking the deficit.

Democrats responded to yesterday's good news on the budget by predicting that the red ink would start flooding again in future years as the bills for entitlement programs such as Medicare and Social Security come due. The Democrats will no doubt try to find a way to blame Mr. Bush's tax cuts for those problems, too, but they are the ones who stood most in the way of Mr. Bush's effort to provide a fix to Social Security through private savings accounts for younger members of the work force. The real question is whether the deficit will keep shrinking if the extravagant-spending Democrats gain control not only of Congress but also the White House. The last time a Democratic president cut the deficit, he did it by raising taxes, not cutting them.