Summary table 1 from this CBO document predicts that we will see Federal surpluses by 2012. Read down a little further and one sees continuing large on-budget deficits with the real reason for a unified surplus being that we will be adding a lot to the Social Security Trust Fund reserves. Of course, the Bush crowd does not think those funds should be used to finance your future retirement benefits.
Menzie Chinn adds a number of other qualifications to this prediction of Federal surpluses:
What is important to remember is that the projections are under current law. One important aspect of this caveat is that this means the provisions of EGTRRA and JGTRRA are allowed to expire in tracing out this scenario, a path that President Bush has opted against. A second point is that the current budget deficit is one being run at full employment
Not only does Menzie add the impact of possible future business cycles, he tosses in a couple of pieces of realism with respect to George W. Bush’s appetite to “spend and spend”:
To highlight what is more likely, even if the economy maintains relatively healthy growth over the next few years, assume (1) the tax cuts are made permanent, (2) troop levels in Iraq, Afghanistan and other GWOT activities are reduced to 75,000 by 2013, and (3) discretionary spending rises with the growth rate of nominal GDP.
Check out his alternative graph of the rising unified deficit. Let’s keep this in mind as we listen to this White House crowing about how fiscally responsible it has been.