Bush administration budget on target

(Source Article: White House will hit budget early - FT.com)

The Bush administration might be celebrating a year early, as surging US tax revenues are expected to push the administration toward its budget deficit target a year ahead of schedule in 2008. When the target is reached, the administration will halve the deficit from a projected peak from 2004, regardless of what Congress does with the alternative minimum tax.

Early forecasts by the US Treasury stated that the alternative minimum tax indexation would increase the budget deficit by $21 billion in 2007, $59 billion in 2008, $76 billion in 2009 and $92 billion in 2010. However, now the White House forecasts that the deficit will fall to $247 billion in 2008 at 1.7% of GDP—below the original $260 billion, or 2.2% of GDP, earlier estimate.

These larger than expected tax revenues are good news for the GOP as they head into midterm elections in the fall, with a budget deficit being lower than previously projected. However, their opponents on the other side of the fence will still find much to fault them for come election time. (see Despite tax bump, deficit an election target - NPR)

Analysts cannot confidently attribute the surge in tax revenues to any one factor yet, as it will take years to look at the code to see exactly what is responsible. However, likely factors are increased business profits, which most likely are also driving a 15% forecasted rise in individual income taxes.