The Congressional Budget Office has lowered its federal budget deficit projection for FY 2007 to $172 billion. This represents a $76 billion improvement over projections from last year.
It will be interesting to see how the Democrats will react to the continuing evaporation of the budget deficit. They seem to have locked themselves into the “pay as you go” principle, whereby any spending increase must be offset by a corresponding tax increase. This, needless to say, represents a significant constraint on what the Democrats would really like to do. Perhaps “pay as you go” will join some of the Democrats’ other campaign pledges on the cutting room floor once the current session gets rolling.
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