The Deficit

In his press conference today, President Bush promised to submit a budget that will cut spending and help cut the deficit in half. This is very encouraging, and cutting discretionary spending is something that the Bush Administration needs to do, and should have done sooner. As I stated in an earlier post, the costs of the War on Terror are going to require us to sincerely limit our spending here at home.

In regards to the deficit, it is not something I am not too worried about. Because of the increased tax revenues from last year, the deficit is already about $100 billion smaller than originally projected for 2004. With lowering taxes you decrease tax revenues in the short run, but increase them in the long run. This is because by cutting taxes you increase the amount of money in the economy, which subsequently increases the number of jobs that are being created by that economy. Kennedy's tax-cuts led to the balanced budgets of the sixties while Reagan's tax-cuts led to the surpluses of the nineties. With more and more jobs being created I not only expect the deficit to be more than cut in half in the next couple of years, I expect it to be gone completely within five years. This is obviously a very optimistic expectation, but I believe it is completely realistic, as long as taxes are kept low.