Knowing the score.(budget deficits)

IN mid-July, the Office of Management and Budget (OMB) provided an updated look at our fiscal situation. It included a new deficit figure of $296 billion, down considerably from the February estimate of $423 billion. The new figure, which reflects large revenue gains, has provided ammunition to Democrats and Republicans alike.

Democrats have criticized the figure, complaining that $296 billion is still a big deficit. Many Republicans, however, have celebrated the reduced deficit figures as a vindication of Bush's tax policies and supply-side economics more generally. What the revenue surge proves, says Judd Gregg, the chairman of the Senate Budget Committee, is that "bold pro-growth tax policies enacted by Congress and the president have sparked unprecedented economic growth."

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Who is right? In order to tell, one would need to compare the growth that occurred after the tax cuts to the growth that would have occurred in their absence. Such a comparison is naturally quite speculative. One place to start would be to look at the revenue that past forecasters expected to have in 2007 when they did not know about the tax cuts that ultimately arrived.

The nearby graph shows the evolution of forecasts for 2007 revenue, beginning with the first such forecast, made in 1997. The line across the graph indicates the amount of revenue we currently expect the government to receive in 2007, and each bar indicates the ...