Supply-Side Economics in Action

The Treasury Department reported Friday that federal revenues reached $2.12 trillion ($2,120,000,000,0000) for the first ten months of fiscal year 2007. In both current and inflation-adjusted dollars, that puts the federal government on course for the most revenue it’s ever collected in a year. Indeed, it’s the most revenue any government in the history of the world has ever collected. And yet it’s not enough to satisfy the voracious appetites of the spenders in Congress and the administration. Spending was $2.27 trillion for the same ten months.

It seems that the deficit problem in Washington is not a result of insufficient tax revenue but rather the inexorable growth of spending on everything from earmarks to entitlements to war.

To be sure, the U.S. economy is the largest national economy in history, and that’s the main reason for record tax levels. And tax revenues are not at their peak in terms of percentage of GDP–though they’re getting close. Earlier in the year OMB estimated that revenues as a percentage of GDP would reach 18.5 percent in 2007. But as of a month ago that figure had reached 18.8 percent, approaching the levels that typically produce popular demand for relief. But as spending interests become stronger and more widespread in Washington, popular demand for lower taxes faces more resistance. It seems safe to conclude that George W. Bush will go down in history as the biggest taxer and the biggest spender ever.