BUDGET CUTS

LARRY KUDLOW says:

With the economy humming in FY 2005, the federal budget deficit should be coming down more than it has. Through five months, FY to date, tax collections are rising about 10%. However, budget outlays are rising around 7%.

By my estimate, the FY05 federal budget deficit will come in around $386 billion, as compared to $413 billion in FY04. In other words, we are not getting the deficit yield we should be getting from a robust economy that is trending towards 4% growth. The tax cuts of 2003 have done their job in promoting growth. But policymakers are failing to hold back spending. The federal budget should be growing below the inflation rate, but it is actually growing at more than twice the inflation rate.

(Emphasis mine - HeavyHanded)

This is wrong. The White House should be rescinding various outlays in a mid-year mid-course correction. Two sharp budget analysts from Washington, Chris Edwards of Cato and Brian Riedl of Heritage, have proposed 150 billion dollars worth of spending cuts (see below.) This could form the basis for a midyear budget-cutting exercise that could impact the remaining seven months (actually six months, since we are at the end of March, even though we only have data through February). If growth in non-defense, non-entitlement, non-interest outlays is held to 1% for the rest of the fiscal year, the 2005 budget deficit could be lowered by $25 billion to $361 billion.

It could be an exercise in good budget management, like a corporation controlling its expenses. Five year budget projections are nothing but planning exercise well into the future, but taking action right now in this fiscal year would make a huge difference both today and over the next five years. To maintain economic growth, and preserve lower tax rates, there's no time like the present to pull out a budget knife and start carving down overspending."

(Emphasis mine - HH)