GASP! Lower receipts exceed Treasury predictions

Larry Kudlow at NRO picks up on a largely ignored by the MSM (outside of the WaPo) significant piece of news on how the surge in receipts lowered the deficit predictions. Kudlow:

After reading the story I wanted more details, so I dug inside the daily Treasury statements. There I found that non-withheld receipts from capital gains, dividends, stock options, and other sources came to $144 billion for the April tax-payment month. That’s an incredible 29 percent increase from a year ago when receipts fell by 5 percent.

Consequently, the budget deficit for fiscal year 2005 should come in around $395 billion, or 3.2 percent of gross domestic product, a calculation that includes the military-appropriations supplement for the war on terror. Last year the budget gap was $412 billion, or 3.6 percent of GDP. That led to the Treasury Department borrowing an additional $42 billion. But as a result of the increased tax receipts this year, Treasury will actually pay down $42 billion in debt during the April-June quarter.

Whether the deficit goes up or down, the Treasury’s new idea to re-open 30-year bond issues is a good one. At historically low interest rates, the whole $4.5 trillion of publicly held national debt, which comes to 37 percent of GDP, should be refinanced and permanently funded through long-term offerings. And why stop at 30? Britain, France, and Japan use 50-year bonds. So should we. Insurance companies, pension funds, and other institutional investors will gobble up the paper.

That said, the news of higher tax payments is big. And the real story behind the numbers is the successful supply-side experiment that began in the middle of 2003, when investment tax rates were slashed on capital gains and dividends. With new incentives to counter the deflation of investment during the 2000-02 period, both capital formation and economic growth came back from the dead.

Read the whole thing.