At Arm's Length - Financial Commentary about Money, Investing, and How It Affects the Average Investor

At Arm's Length: 07.18.05

Celebrating Red

There is always the chance that when you try to predict just how bad things might become, you find yourself overestimating. Of course on the flip side, underestimating can make you look as if you are trying to juice the stats to make whatever data you are looking for to be better than it is. In the case of deficits, underestimating leads everyone to believe that the state of the economy is worse than even your esteemed knowledge might have known. Overestimating, when it comes to deficits, is cause for celebration.

And that is exactly what the Bush administration did this past week as the usually dire warnings of impending fiscal doom were muted somewhat by a lower deficit number than had been forecasts way back in February. While that should seem like a step in the right direction, the one time reduction in the federal deficit of $100 billion is just that, a one time blip on the spending screen.

Newly minted talking head for the President, Ben Bernanke stepped up to the microphones and offered his take on the reduction, which came in at $333 billion in the hole instead of $412 billion - the first number coming out of '04- with the added $15 billion coming in the February revision bringing the total to $427 billion. He credited the President's fiscal policy.

The most worrisome part is the one time pop corporate tax revenues added to the reduction, which won't be there next time. But if those Congressional spendthrifts think that $100 billion less in deficit spending is actually another $100 billion to spend, we have very little reason to celebrate.

The previous week's articles.

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