The Incredible Shrinking Deficit

On the subject of government revenues, it looks like this year's deficit won't be as bad as projected, clocking in at $350 billion rather than $427 billion.  Good stuff, and the administration will surely tout it as a God-given sign that their agenda is a blessed one, and their fiscal policy wise.  But let's not relax yet:

the nation still faces long-term deficit problems. Overall federal spending is increasing, including for war costs. More broadly, spiraling health-care costs for Medicare and Medicaid programs, including a prescription-drug benefit for seniors starting next year and a wave of baby-boomer retirements after 2008, will drive federal deficits to unsustainable sizes.

"These are the good ol' days. These are the best of times," says Congressional Budget Office Director Douglas Holtz-Eakin, a former administration economic adviser. "After this, it gets worse."

The WSJ has a graphical representation of this that's pretty stark:

Naaf608a_budget06082005210340

So, sorry kids, smaller deficit or not, we're still going to have to raise those revenues.  And, on an ironic note, much of the narrowed deficit comes from the administration counting Social Security surpluses up until 2017.  So you can argue whether or not that program's in bad shape till you turn blue in the face, but what does it say about our fiscal picture that the program remains a rare bright spot our economy?

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