How Can Losing $1 Trillion be Good?

Daniel Gross has an article on Slate magazine that explains why losing $1 trillion is actually good news:

On Tuesday, the Treasury reported the federal government's receipts and expenses for June. The upshot: Through the first nine months of fiscal 2010 (which started last fall), the federal government has run a $1 trillion deficit.

Deficits hawks will doubtless highlight these numbers as yet another reason why the National Debt Commission must move swiftly to cut social insurance and impose new regressive taxes. I take the opposite view. The fiscal 2010 deficit—$1 trillion and counting—is an encouraging sign.

Go read the whole article to get the details. But here's a peek at a few:

Last February, when OMB released its budget for fiscal 2011, the administration forecast a deficit for the year—already half over—of $1.556 trillion. But this spring, revenues have come in much better than expected. In the first nine months of this fiscal year, corporate income taxes have totaled $133 billion—almost as much as for all of fiscal 2009. You can't read too much into a single month, but June's revenues, at $251 billion, were up 15 percent from $219 billion in June 2009. Since February, tax receipts are up 11 percent from the comparable period in the prior fiscal year. Meanwhile, so far this year, spending is down 3 percent from fiscal 2009. Let's assume that for the remaining three months of fiscal 2010, revenues continue to be 9 percent greater and spending 3 percent less than in the final three months of fiscal 2009. The year would close with a deficit of $1.2 trillion—an improvement of $350 billion over the projection made in February. My guess is that OMB's midsession review, which will come out in August, will show that the fiscal picture for both fiscal 2010 and 2011 is better than we think. (True obsessives can follow daily tax receipts at the Bureau of Financial Management's daily statements.)