The economy is awash in tax revenues both at theFederal and state levels. This is the problem we always find with budget deficit forecasts: They do not reflect correctly the part of the deficit that is due to the structure of the budget versus the deficit caused by low output. Two good years of economic growth have helped greatly in getting Mr. Bush's modest proposal to halve the budget deficit (as a share of GDP) become reality, as Jed Graham notes, but things could be a lot better.

while the economy's momentum has led to a surge in tax revenues, progress in reducing the deficit depends on spending restraint. On that front, some remain disappointed.

At the moment, Congress is spending the money almost "as fast as it comes in," Riedl said.

Through the first nine months of fiscal 2005, federal spending rose $128 billion, or 7.4%, to $1.85 trillion. Spending on defense and nondefense has risen at similar rates, CBO says.

(Here's CBO's latest projection.) The standardized budget deficit for 2005 is projected to be $310 billion. If we come in at $325 it means the rest has to come from government reductions in spending or tax increases.

Thus the debate on whether the current wave of tax collections is evidence of supply-side economics or just fortuitous timing.