The Administration Snookers Edmund Andrews

Last winter, Stan Collender wrote:

BUDGET BATTLES: Wolf! (01/17/2006): The Bush administration held a conference call with reporters last week to say that the 2006 deficit would be $400 billion or more. As the White House hoped, the media dutifully reported that number. But, as it almost certainly did not want, the media also reported that this latest Bush administration budget pronouncement should be treated with doubt, skepticism, and perhaps even outright contempt. The reason is that this president has a well-established history of overstating the deficit early in the year and then taking credit when it turns out to be lower than projected, even if it has done nothing to make that happen...

Today, the usually-reliable Edmund Andrews obligingly falls for the administration's trick:

Surprising Jump in Tax Revenues Is Curbing Deficit - New York Times: By EDMUND L. ANDREWS: WASHINGTON, July 8 -- An unexpectedly steep rise in tax revenues from corporations and the wealthy is driving down the projected budget deficit this year, even though spending has climbed sharply because of the war in Iraq and the cost of hurricane relief. On Tuesday, White House officials are expected to announce that the tax receipts will be about $250 billion above last year's levels and that the deficit will be about $100 billion less than what they projected six months ago. The rising tide in tax payments has been building for months, but the increased scale is surprising even seasoned budget analysts and making it easier for both the administration and Congress to finesse the big run-up in spending over the past year. Tax revenues are climbing twice as fast as the administration predicted in February, so fast that the budget deficit could actually decline this year...

Two things are going on: approximately $60 billion of real good news on the revenue side for the 2006 deficit, and an approximately $60 billion highballed overstatement by the White House last winter about what the deficit was likely to be. Yet Edmund Andrews treats all $120 billion as if it were genuine good news--generating a bunch of high fives in the White House press office.

Why does the White House lie all the time, about everything? Because the press corps lets them get away with it.

Comments

[Dan Kahn]

As soon as I read that NYTimes.com headline I thought the exact same thing.

And it's not like this is a new tactic. This is the 5th year in a row, playing the same game. More proof that the elite media is either duplicitous, mentally challenged, or both.

[anne]

Agreed, but I have still been pleasantly surprised by the size of revenues. Growth has simply been more robust than projected by most. We have been growing well, with labor force participation and wage and benefit growth the curious disappointments.

[AK]

I fully expect the usual suspects (such as the WSJ Editorial page) to come crawling out of the woodwork explaining how this means that supply-side works after all. Maybe someone should point out here that Corporate tax receipts are what has increased and there hasnt been any broad-based corporate tax relief.

[anne]

http://www.nytimes.com/2006/07/09/washington/09econ.html?ex=1310097600&en=ec2f2425a9899725&ei=5090&partner=rssuserland&emc=rss

EDMUND L. ANDREWS:

Despite almost five years of economic growth, individual tax receipts have yet to reach the levels of 2000. Even with surging payments for investment profits and business income, individual tax payments in 2005 were only $972 billion — below the $1 trillion reached in 2000, even without adjusting for inflation.

Over all, individual and corporate taxes have lagged well behind the economy's growth over the past five years. Government spending, by contrast, mushroomed far faster than the economy....

Compared with the size of the economy, tax revenues are still below historical norms and far below what the administration predicted as recently as 2003.

Tax receipts amounted to about 17.5 percent of the nation's gross domestic product in 2005, far below the level five years ago and still slightly below the average of 18 percent since World War II. Spending, by contrast, is running at about 20 percent of gross domestic product ....

[anne]

http://www.nytimes.com/2006/07/09/washington/09econ.html?ex=1310097600&en=ec2f2425a9899725&ei=5090&partner=rssuserland&emc=rss

One reason for the increased volatility may be that a large share of income taxes is now paid by the nation's wealthiest families, and their incomes are based much more on the swings of the stock market than on wages and salaries.About one-third of all income taxes are paid by households in the top 1 percent of income earners, who make more than about $300,000 a year. Because those households also earn the overwhelming share of taxable investment income and executive bonuses, both their incomes and their tax liabilities swing sharply in bull and bear markets....

[anne]

Supposing that an increasingly significant portion of revenue is coming from the wealthiest tax payers, the added revenue even if indicating fairly robust economic growth may also be an early indication of a continuing climb in income and wealth inequality.

[Auros]

Re: anne's comment that we are growing robustly -- the correct responses here are that a) it sure is funny that with all this growth, real median wages are declining, and b) "Gee, how does this growth square with the Intermediate Cost projections of the Social Security trustees?"