Day By Day

Friday, June 29, 2007

The Bush Economic Miracle Redux

Remember all those scare stories by Clintonian and Reaganite clones to the effect that Bush was bankrupting the country, that the deficit was out of control, that radical inflation or tax hikes would be necessary to restore responsible finance? Of course you do. Those charges were a major campaign theme in 2004 and have helped to fuel the Republican revolt.

Well..., the charges were baseless and the doomsayers were wrong.

Bloomberg reports:

[T]he unexpected surge in tax receipts may pare the budget deficit by 39 percent to $150 billion this fiscal year, causing a relative scarcity of four-week, three-month and six-month bills. The result is the biggest bull market for Treasury bills since the terrorist attacks on Sept. 11 drove investors to the safety of the securities.

Individual and corporate income tax revenues are growing for a fourth straight year in spite of five rounds of Bush tax cuts totaling about $2 trillion from 2001 to 2006. With less need to borrow, the government has cut sales of bills. The supply, which peaked in March 2005 at $1.06 trillion, fell to $919.1 billion at the end of May and will drop by about $160 billion this quarter, a record.

Treasuries ``are among the best liquid assets in the world, and low deficits keep them scarce, and yields low,'' Robert Mundell, a professor at Columbia University in New York and winner of the 1999 Nobel Prize for economics, said in an e-mailed response to a question.

Yields on three-month bills tumbled last week to a 16-month low of 4.53 percent, about three-quarters of a percentage point lower than the Federal Reserve's 5.25 percent target for the overnight lending rate between banks. The last time bill yields were that far below the federal funds rate was after the terrorist attacks in New York and Arlington, Virginia, in 2001.

`A Heck of a Job'

Along with record highs in the Standard & Poor's 500 Index of large-company shares and the smallest yield premiums on the riskiest corporate bonds in the past month, low bill yields are a sign of confidence.

Read the whole thing here.

I have said it over and over -- in terms of their management of the economy the Bush administration has performed far better than any other administration in living memory.

Once again Bush turns out to be far more competent than his critics.


Don Surber, of course, has his unique take on this story.
Darn you, George Bush. Bloomberg reported that the federal budget deficit is shrinking so fast that there is a shortage of government debt:
He goes on to point out that the same people who insist that there is a financial crisis because it is impossible to grow your way out of a deficit were just a few years ago insisting that there was no crisis in Social Security because the economy would grow its way out of the projected deficit. Funny thing that.

Read Surber's piece here.