Headed for the Black?

Nobody offered much argument last January when President Truman predicted a budget deficit of $5.1 billion for the 1950-51 fiscal year. But last week things looked a little different. U.S. income, thanks to the boom, was running well ahead of estimates. Thus, chances were good that the deficit would be much smaller than estimated even with new arms orders, since actual spending lags far behind appropriations.

For July and August, the first two months of the fiscal year, Treasury receipts were 7% higher than the same period last year and expenditures were 26% less. At this rate, Treasury's income at year's end would amount to some $39.6 billion v. the President's prediction of $37.3 billion. The pending tax bill would add another $3.5 billion, bringing Treasury's total take to about $43.1 billion. Even with bigger defense appropriations, it looked as if the Treasury's cash outlay would not exceed $44 billion.

Furthermore, the prospect was that tax receipts would continue to increase, even under current rates. Washington's economists have long estimated that every $10 billion increase in the gross national product results in slightly more than a $2 billion increase in Treasury's tax revenues. In a year, the gross national product has soared $14.7 billion (to a rate of $270 billion annually), enough to add nearly $3 billion to the Treasury's purse. Under the new tax law the increase will be even faster. If the gross national product keeps climbing--and there is no reason to think it won't--the Treasury might even find the budget in balance for the first time since fiscal 1948.

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