(Corrects to delete reference to tax cuts in 21st paragraph. Commentary. Gene Sperling, who was President Bill Clinton's top economic adviser, is a columnist for Bloomberg News and a senior fellow at the Center for American Progress. The opinions expressed are his own.)

July 14 (Bloomberg) -- Here's a multiple choice question:

What is the most absurd aspect of supply-siders' claim that the possible improvement in this year's budget deficit -- to an estimated $333 billion from more than $400 billion in February - -proves that deficit-exploding tax cuts are working and paying for themselves?

Here are your choices:

A) their failure to acknowledge the deep fiscal hole that President George W. Bush's policies have already put us in and the temporary nature of key factors that are contributing to this year's better-than-expected revenue;

B) their ability to attribute to the Bush tax cuts only good economic news but never any disappointing job, wage or market data; or

C) the lowering of standards that allows advocates of supply-side economics to brag about an administration that inherited four years of consecutive surpluses and now is looking at trillions of dollars of future deficits.

This is not an easy question, so it's worth exploring the possible options.

The first pick is a strong contender. Supply-side cheerleaders suggest that we are now on a revenue trend that's likely soon to dramatically reduce the deficit.

One-Time Gains

Everyone from Congressional Budget Office Director and former Bush administration official Douglas Holtz-Eakin to Goldman Sachs Group Inc. to Economy.com say temporary factors such as a one-time corporate tax holiday for repatriated profits and the end of the temporary depreciation bonus for equipment drove much of the rise in revenue.

Far from moving toward a new era of surpluses, most experts who take into account the likely costs of Bush priorities are projecting $400 billion annual deficits as far as the eye can see.

Even taking account of the recent improvement in the deficit projections for 2005, Economy.com -- a Web site that provides economic forecasts -- expects the federal government to run a $4 trillion deficit over the next 10 years. Goldman Sachs projects $4.8 trillion in cumulative deficits.

Try Option B

The selective attribution that is the heart of Option B also must be taken seriously.

This option can be summed up as the idea that any bad economic news has nothing to do with Bush fiscal policies, but that any good news is due solely to the magic of tax cuts.

When gross domestic product, investment or revenue estimates are better than expected, it's all thanks to the Bush tax cuts. If the Chicago Cubs win the World Series anytime in the next century, you should know it will be due to the Bush tax cuts.

There are other economic trends that have occurred in the aftermath of President Bush's decision to abandon fiscal discipline.

Average real weekly wages were lower in June 2005 than they were both when the recession ended and since the dividend and capital gains tax cut of 2003.

Job growth in the Bush recovery is the weakest of any recovery since the 1930s. The current account deficit hit historic highs in 2002, 2003 and 2004 and is headed for another record in 2005.

The S&P 500 monthly average was lower in June 2005 than it was four years ago, when the Bush tax cuts began.

Not All Blame

While you can't blame this bad news solely on Bush fiscal policies, it is a bit much for his cheerleaders to claim that the impact of his policies is limited to only what is positive.

Option C may be the best choice.

When Bush came into office, the CBO projected a $433 billion surplus in 2005. Even if the new projection announced yesterday by the White House comes true, it would mark a three- quarter of a trillion dollar deterioration from projections when Bush took office.

As New York University economist Nouriel Roubini has documented, when one breaks down the weakening of our fiscal position, three-quarters of it is accounted for by a collapse in government revenues. Only one-quarter was the result of increased spending.

While it is true that revenues as a share of GDP in the late 1990s were slightly higher than the historical average, these revenues were used to pay down the national debt to help prepare us for the baby-boom retirement. Nor did increased tax payments prevent after-tax income from rising across-the-board.

When one compares the trillions in surpluses that were projected when President Bush took office with the current projections by independent analysts, we are looking at a 10-year fiscal projection that has deteriorated by $10 trillion.

If Al Gore had won in 2000 and racked up this fiscal record, I don't think the supply-siders would be pointing to the current deficit picture as proof that his policies were working.

Perhaps I should have added another option: D) all of the above.

To contact the writer of this column: Gene Sperling in Washington at gsperling@cfr.org

Last Updated: July 14, 2005 11:51 EDT