Rescind the Budget

Larry Kudlow has some good advice for the Bush administration: rescind some of the government's projected outlays. If it has any desire to preserve its tax cuts and maintain any confidence in its spending restraint, it needs to do so.

The just-released March Treasury statement on the U.S. budget is bad news for the Bush administration. According to my calculations the FY 2005 budget deficit is on track to come in at $460 billion, or 3.8 percent of projected GDP, compared to the FY 2004 deficit of $427 billion, which was 3.5 percent of GDP.

The problem is certainly not revenue, but spending.

At lower tax-rates implemented in mid-2003, solid economic growth is throwing off a 10.4 percent year-to-date increase in revenues compared to the prior year. Income tax collections are rising 8.5 percent. Corporate tax receipts are flooding in at a 48.3 percent pace. Importantly, non-withheld tax receipts, which include dividends and capital gains, are rising at a 9.1 percent pace.

Unfortunately, spending is trending at 7.1% vs. 6.2% the previous year, despite Bush's promises to hold non-defense, non-security discretionary spending to just 1%. Take Larry's advice Mr. President and hold to your guns on spending.