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May 2005
by James C. Musser, ASBA Washington Representative

The major media may not be carrying the story because they tend to focus on the negative but there is plenty of good news on the economy and Washington has even been doing its part to help. By a vote of 214-211 in the House and 52-47 in the Senate, the U.S. Congress passed the Fiscal Year 2006 Budget Resolution which sets the spending and tax policy for the federal government for the next fiscal year. The budget contains some small but much needed restraint on new spending and makes allowance for continuation of the Bush tax cuts, such as the increase in small business expensing and the reduction in the capital gains tax rate, that were set to expire. Having the budget in place will provide much greater spending discipline than in several previous years when Congress was not able to reach an agreement.

House Budget Committee Chairman Jim Nussle (R-IA) said, "The budget we passed will continue to build upon our successful policies that have resulted in real growth in the economy and real job creation." The numbers appear to give credibility to Nussle's statement. Real Gross Domestic Product (GDP), the measure of all goods and services produced in the country, grew by 3.1% in the first quarter of 2005. That number represents the 14th consecutive quarter of growth since the end of the recession and the 8th consecutive quarter of GDP growth above 3% in that time period.

The growing GDP was also reflected in the job market. Employment measured by payroll increased by 274,000 jobs in April and total employment, including the self-employed, stood at over 140 million. The unemployment rate stood at 5.2% in April well below the decade averages for the 1970s (6.2%), the 1980s (7.3%) and the 1990s (5.8%). In fact, unemployment claims in April were at the lowest sustained levels in over four years. At the same time, new home sales are at record highs and new housing starts are at the highest levels in two decades.

The other good news is that the government red ink is shrinking. The combination of spending restraint and increased revenues generated by the economic growth have worked together to reduce the projected budget deficit. While much work remains to be done to reduce over-spending by the government, according to the non-partisan Congressional Budget Office, the estimated budget deficit is expected to shrink by more than $50 billion in FY 2005 from $412 billion to $350 billion. A continued policy of spending restraint and growth producing tax cuts promises to be a powerful force in further reducing the deficit. That is good news for all Americans.

James C. Musser, Esq. is a legislative consultant based in Falls Church, Virginia. His reports are updated monthly.