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Another $200 Billion Chopped From the Budget Deficit

It’s become politically correct to throw a Twitter-fit about the budget deficit. We’ve heard it for years. We’re going to be the next Spain, we aren’t setting a good example for our children, entitlement programs are going to be bankrupt.

At least for now, we need to move on to something else to complain about because the budget deficit is shrinking fast. According to Bloomberg, the Congressional Budget Office just revised down the 2013 budget deficit by another $200 billion from its February estimate making the new estimate, $642 billion.

What’s making the deficit shrink so fast? More money is showing up on the doorstep of the treasury. Individual income tax receipts are up $69 billion or 5 percent while corporate tax payments are projected to be around $40 billion–a 16 percent increase.

And if that isn’t enough, Fannie Mae threw a spare $95 billion towards the Treasury because of a substantially lower default rate. This not only lowered budget deficit estimates, it pushed back the looming debt ceiling battle that was soon to brew in Washington.

The first reaction is to blame or praise the sequester. Congress and the White House can’t agree on anything so rather than solving the problem, they put in place a list of arbitrary cuts. Those cuts that are now reality represent a substantial cut in expenditures but sequester savings were factored in to the February estimate along with the increased revenue from the tax increases that Congress passed in January.

Instead, the growth in revenue comes from something that Washington will try to take credit for but in reality, it has little to do with lawmakers. It’s organic growth. The economy is improving and that’s allowing businesses and employees to earn more money. Nobody likes to pay more taxes but it’s a good problem to have.

Disclosure: At the time of this writing, Tim Parker was happy that families are making more.

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