I mentioned I was going to zero in on the question of when and if the unified federal budget outcome would move into balance if current trends continued. Here’s the chart we’ll be watching each month (click to enlarge), followed by an important explanation:
Each data point on this chart is a 12-month total, ending with the most recent month. Based on several emails I’ve received in the last two years—two of them hysterical about what they perceived as the delusional idiocy of the chart—“rolling 12 months” seems to be a difficult concept for some people to grasp. But in reality, it’s simple; think of it this way: just treat any given month as the last month in a “fiscal” year. One time out of twelve (September), it just so happens to coincide with the federal government’s chosen definition for “fiscal year.”
During my corporate career, we used the rolling-12 chart to help us track the sales volume trends in our core brands, because it eliminates the effects of seasonality within a year, and therefore clearly isolates the overall trends. It was a time-saver, frequently pointing us to the right questions very quickly.
This is not a forecast, it is just a projection of current trends. If there’s one thing that’s certain, it is that trends do not last forever; they are almost always broken by some kind of major event that creates a spike, or a discontinuity; it's only a matter of time. Each month. we’ll be watching for two things:
(1) Is either trend accelerating or tapering off?
(2) Have we experienced an event that renders previous trends obsolete?
For partisan ideologues, if you know any
Although this chart is just a report of what the Monthly Treasury Statement is telling us, that of course doesn’t stop anyone so inclined from jumping directly to knee-jerk political conclusions. Let’s face it, some people already have their minds made up, and have a habit of trying to spin everything they see into evidence that the other side is a bunch of idiots, or sneaky bad guys. (“Are those evil Republicans sandbagging the deficit forecast?” “Why are the sneaky Democrats covering up the tax revenue growth that’s been happening without any tax hikes?”) The propensity to “spin first” is an attribute of many on both the left and right, although I personally have noticed a higher frequency of knee-jerk hysteria from the left. In any case, it’s just human nature for lazy people, and for ideologues attempting to masquerade as economists. [One person thinks this chart is “complete garbage” based on “noisy” data. No explanation, just a blanket conclusion. That kind of feedback does not help me, nor does it impress me; however, I cannot deny that it would fit nicely on a political bumpersticker, or sound cool in a post at a political blog.]
Anyway, this is the chart we’ll be watching each month. For almost two years now, the crossover point, i.e., the point at which the budget outcome is in balance, has been oscillating between mid-2008 and mid-2009. I’m personally hoping for mid-2008, solely for the entertainment value we’d enjoy during campaign season.
[What's really ironic is that I am not even in favor of a balanced budget as it is currently (naively) defined; but I can't deny the numbers and trends.]