On July 16, 2004 Larry Kudlow wrote an editorial in the National Review Online titled "Kerry’s Economic Deficit". On July 18th, the editorial was carried in the Washington Times and the New York Post. In the second paragraph, Kudlow states:
Tax receipts from businesses rose an astonishing 38 percent over the past twelve months and personal income-tax collections increased almost 9 percent. What’s happening? Could it be that stronger economic growth from lower tax rates is producing more tax receipts? I believe it’s called supply-side economics.
No, it's called a recovery from a recession. The following tables show the receipts from corporate and individual income taxes for every month since October of 1997:
Corporate income tax receipts (billions of dollars)
Fiscal
Year Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Total
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ------
1998 3.25 3.91 44.04 4.41 0.83 19.49 27.36 3.26 39.79 4.07 1.47 36.80 188.68
1999 1.76 3.44 42.37 5.13 1.18 18.55 21.70 3.95 39.26 3.41 3.70 40.24 184.68
2000 2.18 1.65 44.95 5.34 1.78 24.27 27.69 5.77 40.53 5.01 4.67 43.44 207.29
2001 1.71 2.05 51.31 5.71 -1.50 20.69 23.39 4.45 29.95 2.71 3.14 7.48 151.08
2002 19.75 -0.39 5.99 9.25 -1.94 15.33 9.83 1.25 26.47 1.68 -0.34 30.82 148.04
2003 -4.49 -2.15 39.62 1.19 -1.20 11.59 18.28 2.66 32.03 2.63 1.27 30.34 131.78
2004 3.67 0.20 39.30 4.39 0.83 18.93 23.49 5.23 44.31 140.34*
Individual income tax receipts (billions of dollars)
Fiscal
Year Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Total
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ------
1998 60.7 46.6 69.1 95.8 42.2 39.7 158.3 30.0 81.6 59.0 55.3 90.5 828.6
1999 60.3 51.3 76.0 99.9 42.9 50.6 164.9 30.7 93.0 60.0 60.7 89.3 879.5
2000 63.5 57.5 94.5 111.3 45.7 44.8 184.2 63.7 100.5 66.3 68.0 104.4 1004.5
2001 76.0 60.5 83.5 135.7 48.0 35.1 220.4 47.8 93.7 60.5 52.0 81.3 994.3
2002 77.8 56.5 92.0 112.1 35.7 25.0 137.3 26.0 80.8 64.6 58.7 91.7 858.3
2003 67.7 55.0 75.0 108.8 25.0 40.6 121.7 24.1 86.8 54.2 45.5 89.5 793.7
2004 67.6 49.6 81.4 100.8 24.4 43.8 103.6 30.7 94.4 596.4*
* Total of October through June for 2004
Source: Department of the Treasury, Monthly Treasury Statements, Table 7, online at
http://www.fms.treas.gov/mts/mts0998.pdf (September 1998)
http://www.fms.treas.gov/mts/mts0999.pdf (September 1999)
http://www.fms.treas.gov/mts/mts0900.pdf (September 2000)
http://www.fms.treas.gov/mts/mts0901.pdf (September 2001)
http://www.fms.treas.gov/mts/mts0902.pdf (September 2002)
http://www.fms.treas.gov/mts/mts0903.pdf (September 2003)
http://www.fms.treas.gov/mts/mts0604.pdf (June 2004)
As can be seen, corporate income tax receipts did increase 38 percent from $32.03 billion in June of 2003 to $44.31 billion in June of 2004. However, that is only 9.3 percent above the prior high of $40.53 billion reached in June of 2000. Hence, most of that 38 percent increase is simply a recovery from the crash of corporate income tax receipts that occurred in 2000 through 2003.
Likewise, individual income tax receipts did increase almost 9 percent from $86.8 billion in June of 2003 to $94.4 billion in June of 2004. However, that is still 6 percent below the prior high of $100.5 billion reached in June of 2000. In any case, Kudlow goes on to state:
Just as the 1.5 million new jobs created since last August has terminated talk of a jobless recovery, the chatter over widening budget deficits will end.
The number of nonfarm jobs has increased by 1.5 million since August of 2003. However, that marked the precise low in the number of nonfarm jobs. The current number is still 1.2 million below where it was at the high reached in March of 2001. Hence, it is still a bit premature to talk about the end of the jobless recovery. In addition, the budget deficit is still widening, at least to this point. A Reuters article on July 13 mentioned the 38 percent rise in corporate tax receipts and nearly 9 percent rise in individual tax receipts. It then went on to state:
The U.S. remains on track for a second straight record annual budget deficit, on the heels of a $374.23 billion shortfall in 2003.
For the first nine months of the fiscal year, which began Oct. 1, the U.S. has an accumulated federal deficit of $326.62 billion, well ahead of its $269.71 billion shortfall at the same point last year.
June's result is only the second monthly surplus this budget year, compared to four monthly overflows in the first nine months of fiscal 2003, according to Treasury data.
Regarding the budget deficit, Kudlow goes on to state:
But there is virtually no evidence that the budget gap (two-thirds of which emanated from the Clinton recession) has had any negative effect on U.S. recovery prospects. In fact, even with the fastest economic growth in twenty years, long-term Treasury rates remain at 4.5 percent, the cheapest money in over forty years.
In fact, the claim that we are experiencing "the fastest economic growth in twenty years" has been going through an interesting evolution and is much less impressive than it sounds. There is an analysis of that claim at this link.