Mid-session Budget Review: Strong Revenue Growth Continues

The Office of Management and Budget has published its “Mid-Session Budget Review.” To sum the situation up:
– Federal tax revenues continue to be very strong, having risen by 7 percent. This comes on the heels of increases of 15 percent and 12 percent the past two years (clearly tax cuts are helping the economy);
– At 1.5 percent of GDP, the budget deficit is now lower than it was in 24 of the past 30 years;
– Total 2007 federal spending is estimated to be 20.2 percent of GDP, up from 18.5 percent when President Bush took office. Had spending remained at 18.5 percent of GDP, this year’s budget would show a $35 billion surplus.
Basically, what the OMB is telling us is that spending is rising fast, but the economy (and tax revenues) continue to outpace even Congress’s ability to spend. If Congress and the President could agree to limit federal spending to inflation and population growth, the deficit would be gone and economic growth would continue long into the future.
Of course, it wouldn’t hurt New Mexico to enact similar limits.

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