Deficit Watch, Aug 2007

At first glance, the August report from the Treasury doesn't look good; it makes a balanced budget appear improbable before 2010.  However, total spending looks abnormally inflated by an unusual amount of Social Security Administration outlays (about $30 billion above normal) in August.  If that's some kind of timing issue, it should come back down soon; if not, we can forget about this whole balanced budget trend analysis. 

Before I post the usual trend chart, I'll show why I think the August outlays by the SS Admin are abnormally high.

The September Treasury report should clear that one up.  For now, I've added a dotted line to the chart below, to show the hypothetical spending trend if the SS Admin outlays in August had been "normal"—in which case, the budget would be trending toward balance in mid-2009, later than previous months' trends have been indicating.   

Click to enlarge.

Comments

[Counter Revolutionary]

Thanks Steve! Put it up at my house. BTW, the WSJ said the higher SS payments were due to the Labor Day holiday causing the normal September payments to be paid in August.

[Counter Revolutionary]

Thanks Steve! Put it up at my house. BTW, the WSJ said the higher SS payments were due to the Labor Day holiday causing the normal September payments to be paid in August.

[jimmy the Dhimmi]

Does this mean you might lose the bet, steve?

[Steve]

I have until Dec '09, but the short answer is Yes: the later it moves out, the more likely I'll lose the bet. (I keep hearing good news about the economy, but we'll see whether that translates into continued revenue strength in the next several Treasury reports.)

[Boghie]

Me thinks the recent churning of the stock market and the real estate market may suprise everyone...

I think the vast majority of the sells will be for large gains. That is a flat tax of 15%.

September will tell the story.

[rufus]

I haven't had the heart to go wade through the numbers, yet; but I'd think there's probably an extra $10 Billion, or so, of Medicare, and retirement spending pulled forward. I wouldn't be surprised to see a $110 Billion, or so, surplus in Sept.

Domestic business profits have fallen through the cellar. Most of those people that sold, will reinvest. I don't think we're going to make it in 08', but it Could be closer than it feels right now.

[Ironman]

Counter Revolutionary is correct - several government agencies accelerated their payments in advance of the Labor Day holiday:

"The U.S. government posted a $116.97 billion budget deficit in August, a record for that month, as it accelerated some Social Security and Medicare benefit payments into August due to the timing of the Labor Day holiday, the U.S. Treasury said on Thursday." (Ref: http://tinyurl.com/36rbql )

[crashex]

Thanks for the update. If you accept that it's 35 $B SS and 10 $B Medicare costs dragged forward into Aug. because of the holiday, that suggests a 45 B$ difference in the annualized deficit value; still not enough to indicate a reduction from the 165 B$ from July. Is there something else?

In eyeballing the trendlines, both seem to display a distinct knee to the slopes around June or July 2006. What occurred at that point to cause such a change? Could it be the change in Fed Reserved Policy at that point? Is it something else?

[rufus]

Growth has slowed Crashex. The Fed has slowed the growth of money supply down to 2%. Until they get their foot off our neck improvements in the deficit are going to be slow plodding.

Also, keep in mind that the only money, virtually, that our businesses have been making has been overseas. That money isn't coming back to be taxed.

[rufus]

I said that Wrong. Virtually, the only "GROWTH" in profits has been overseas. And, of course, some of those profits will, eventually, be repatriated (just not immediately.)

[Bob]

Steve, it's quiet possible that inflation could rise which will cause tax receipts to soar. Since the government under reports the true inflation rate, payments on SS will be much slower to rise...