Economy has good, bad news

There was good news and bad news on the economic front last week.?First, the good news.?

The White House announced a surprising jump in tax revenues, about $150 billion above what they projected six months ago.?? With tax revenues climbing twice as fast as previously predicted, we could see a decrease in the budget deficit this year.

The main reason for this good news is a big rise in corporate tax receipts, which have nearly tripled since 2003.?Also, there has been a big increase in individual taxes on stock market profits and executive bonuses.? The Congressional Budget Office has reported that corporate tax receipts for the nine months ending in June reached $250 billion ? nearly 26 percent higher than the same time last year. Overall revenues were $206 billion higher for the same reporting period.

Republicans claim the revenue jump proves their tax cuts, especially on stock dividends in 2003, have spurred the economy and produced increased revenues.? According to President Bush, ?The tax relief we delivered has helped unleash the entrepreneurial spirit of America and kept our economy the envy of the world.?

Meanwhile, Congressional analysts assert that this surprise windfall in tax revenues could shrink this year?s deficit to $300 billion, down from $318 billion in 2005 and way down from the all-time high of $412 billion in 2004.

Now for the bad news. Democrats claim that overall revenues have barely climbed back to the levels attained in 2000, and that the government has diverted trillions of dollars from Social Security surplus funds, even as the first baby boomers are nearing retirement.?

Somewhere between the glee of the Republicans and the gloom of the Democrats lies the real truth of the state of our economy.? Tax receipts and their impact on the deficit are important factors in the economic equation. However, they pale in comparison to other factors.

First, our federal debt has mushroomed to $8.3 trillion, up from $5.6 trillion when President Bush took office.?Now, congressional leaders are trying to raise the authorized debt ceiling to $9.6 trillion.? Republicans and Democrats alike continue to spend more than the federal government takes in, with earmarks aplenty to prove that ?one man?s pork is another man?s bacon.?

Second, spending on the war in Iraq has accelerated to about $1.5 billion a week.?That is, at best, a guess.?The horrors of war carry with them hidden costs, both financial and psychological.?History will judge whether those costs are justified. For now, they continue apace.

Third, so-called ?entitlement programs? are rising rapidly.?For example, outlays for Medicare alone have shot up 15 percent this year.?They are expected to reach $300 billion this year.?About half of the increase is due to the prescription costs, which could cost taxpayers nearly $1trillion over the next 10 years.?

What we need is a comprehensive reform of economic policies and programs to address the panoply of problems facing America.?What we?re likely to get is more political posturing by both parties, as they try to position themselves for victory in 2006 and beyond.

Thomas B. Vaughn is a professor at Motlow College and co-host of the radio show ?Viewpoints,? which airs on 91.3 FM, WCPI.