But wait, I just thought the CBO was reporting the annual deficit had hit $889 billion in August, so isn’t the fact that it only came in at $782 billion relatively good news?
Not really. If you dig into the actual CBO report, you’ll see that the relatively good budget numbers for September that cut the deficit had as much to do with Sept. 1 being on Labor Day weekend and Sept. 30 falling on a Sunday in 2018, as it did any kind of economic growth.
In September, the government receives substantial revenues from payments of estimated individual and corporate income taxes. As a result, CBO estimates, the federal government realized a surplus of $116 billion in September 2018—$108 billion more than the surplus in September 2017. Outlays in September of both years were affected by shifts in the timing of certain federal payments that otherwise would have been due on a weekend or a holiday; those shifts reduced outlays in September 2018 by $71 billion but increased them in September 2017 by $44 billion. If not for those shifts, the surplus in September 2018 would have been just $44 billion—$7 billion less than the surplus in September 2017.And note that decline in corporate tax revenues, which is a direct result of the GOP’s Tax Scam. A sizable part of the increase in the deficit for 2018 was because of a corporate tax cut which has done little for everyday workers, but has done a lot for CEOs in the form of stock buybacks and inflated earnings.
CBO estimates that receipts in September 2018 totaled $343 billion—$6 billion (or 2 percent) less than those in the same month last year. Revenues from corporate taxes declined by $21 billion. That decrease was partially offset by an increase of $9 billion in miscellaneous fees and fines and an increase of $5 billion in excise taxes. Revenues from income and payroll taxes were about the same as they were last September….
Total spending in September 2018 was $227 billion, CBO estimates—$114 billion less than the sum in September 2017. If not for timing shifts, outlays in September would have been $1 billion more than they were in the same month last year.
Corporate income tax receipts fell by $92 billion (or 31 percent), reflecting payments for both the 2017 and the 2018 tax years. About half of the decline has occurred since June. Collections in June and September were mostly estimated payments for tax year 2018, when several provisions of P.L. 115-97 took effect, including the new lower corporate tax rate and the expanded ability to immediately deduct the full value of equipment purchases.Also recall that Fiscal Year 2018 only had 9 months of the GOP’s Tax Scam in place on the corporate side, and only had lower withholdings since the end of January. If you look at those figures, you’ll see where the drop in tax revenues hits.
US Indiv. Income Taxes Feb-Sept- 2018 vs 2017
UP $59 BILLION (+6.1%) , but….
MINUS April payments for previous tax year.
UP $700 MILLION (+0.08%)
US Corporate Taxes Jan-Sept 2018 vs 2017
DOWN $78 BILLION (-35.4%)
As "Budget Guy" Stan Collender notes, these limited revenues are the reason the deficit has ballooned, as spending ended up pretty much as expected for the recently-completed Federal Fiscal Year.
In June 2017, CBO issued its updated “Budget and Economic Outlook: 2017-2027″ report that showed federal revenues rising in 2018 under current law to $3.5 trillion (Take a look at Table 13). That means the tax bill reduced revenues this past year by about $200 billion compared to what they would have been had it not been enacted.As a result of the reduced tax revenues and slightly increased spending the high amount of debt isn’t going away any time soon, and neither will the higher interest rates that have come with the increased supply of bonds.
In that same report, outlays in 2018 were projected to be $16 billion less under current law than the amount CBO now says was actually spent last year.
In other words, the real reason the budget deficit grew from 2017 to 2018 was because revenues were substantially less than what they would have been without the tax bill. Had it not been enacted, the deficit would have dropped below $600 billion instead of rising to close to $800 billion.
A deluge of debt supply is set to inundate the $15.3 trillion Treasury market, just as borrowing costs rise. Not only is the U.S. budget deficit primed to swell to roughly $1 trillion by fiscal 2019 and past that in subsequent years, but the interest owed by the government is also forecast to triple in the coming decade to nearly a trillion dollars a year, according to the Congressional Budget Office.Those rising interest rates are about the only thing going up in the financial markets in recent days, and were a main reason behind today's drop of more than 800 points in the DOW Jones Industrial Average.
“The current debt trajectory is already quite onerous,” said Subadra Rajappa, an interest-rate strategist at Societe Generale. “If you keep increasing supply and auction sizes, there is a point where the bond market is going to say, ‘Thanks, but no thanks.’”
The consequences could be far-ranging. With Treasury Secretary Steven Mnuchin set to double new issuance this year and the Federal Reserve scaling back its debt purchases, any dropoff in investor demand for the burgeoning supply of U.S. Treasuries could mean tens of billions of dollars in additional interest -- all of which taxpayers would ultimately have to pay. Starting today, the Treasury Department will auction $230 billion of debt, ranging from one-month bills to 30-year bonds this week.
Signs of pushback have already started to appear. At varying times this year, a strong economy, a hawkish Federal Reserve and worries about the deficit and inflation have all conspired to sour investors on Treasuries.
In recent weeks, the yearlong selloff in Treasuries has accelerated, pushing yields -- the effective cost for the U.S. government to borrow money -- to multiyear highs. Last week, the 10-year note soared above 3.2 percent for the first time since 2011. Demand at a recent Treasury debt auction (where the U.S. actually borrows the money it needs) also fell to a decade low.
So what does our "businessman President" say about this situation?
"The Fed has gone crazy," President Trump tells reporters on Air Force One. Another moment that is unprecedented in the White House.— Josh Dawsey (@jdawsey1) October 10, 2018
Well Donny, there is something you could do about it. Dump the Tax Scam that you signed into law, which will reduce the deficit and reduce the massive amount of US debt hitting the market. Which could prevent the Fed from having to raise short-term rates to control inflation resukting from too much debt and an over-sugared and unequal economy.