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Economists Divided over Impact of Improved Deficit Numbers

President Bush said larger than expected tax revenue has cut the federal deficit, validating his tax cuts. Former Labor Secretary Robert Reich and Wall Street Journal writer Stephen Moore debate what the new numbers mean for the health of the economy.

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    The president doesn't often announce the latest deficit projections himself, but today he did have some good news to discuss about the nation's finances.

    The deficit, he said, is now expected to be $296 billion for the current fiscal year; that would make the deficit more than $125 billion smaller than initially predicted by the administration. But the new deficit estimate is only slightly lower than what the shortfall turned out to be in reality in the last fiscal last year: $318 billion.

    So what to make of the new numbers? We have two views.

    Robert Reich was labor secretary in the Clinton administration. He's currently a professor of public policy at the Goldman School at the University of California, Berkeley.

    And Stephen Moore is senior economics writer at the Wall Street Journal and a member of its editorial board. He's also served as a senior economist on the Joint Economic Committee of the Congress.

    And, Stephen Moore, as we look at something as vast as the U.S. economy, with all of its meshing gears and spinning wheels, what can we say the effect is of a smaller deficit, the government having to borrow less money to run its day-to-day operations?

  • STEPHEN MOORE, Wall Street Journal:

    Well, I think, for the average American, they're not going to really feel the impact in their pocketbook of lower budget deficits.

    But the one thing that I think — the reason there were so many smiles on the faces at the White House today is I think this lower deficit and the higher revenue numbers are an indication of the growing strength of this economy.

    You know, we've seen very large increases in revenue by my estimates and now the estimates that came out today. We're going to see a $500 billion increase in tax receipts over the last two years, which is the largest increase in tax revenues that we've seen in this country for two years, adjusted for inflation in history.

    So it's a good news story for the president. I think he's going to make the case that these numbers show that his tax policies have worked to revive the economy.