May 10: Hug a Liberal Economist Day (April Federal Receipts Will Likely Smash All Records)

Mark it down on your calendars or in your day planners. Pencil it in for 2:00 p.m. Block out the rest of the day.

May 10 after 2:00 PM will be a tough time for liberal economists, who will badly need of a hug. That’s because from that point on, they will have to deal with the reality of April 2007’s Monthly Treasury Statement. Barring a very big surprise, the revenue gusher contained therein should blow the myth that supply-side tax cuts don’t lead to increases in tax receipts out of the water once and for all.

How do I know? Well, I’m not absolutely, positively, totally, 100% sure, but I’m awfully close.

What the chart below shows is that with two reporting days remaining in April (the 27th and 30th), the total of the three biggest categories of federal receipts, net of refunds, is on track to come in over 15% higher than April of 2006 (and an astonishing 18% jump is not outside the realm of possibility):

Sources and explanation:
- All of April 2006 — April 28, 2006 Daily Treasury Statement (DTS; last business day of 2006.
- April 1- 26, 2007 — April 26, 2007 DTS
- Monthly total for April 2006 — April 2006 figure reported in March 2007 MTS
- It is assumed that all other April 2007 taxes will come in at the same total as April 2006.
- The estimates for all of April 2007 took April 26’s data and added estimates for two additional days’ collections to each, based roughly on how those taxes came in during the last two days of April 2006. Based on how collections have come in during April thus far, these estimates are arguably conservative.

The reason I’m not absolutely, positively, totally, 100% sure (but awfully close) is that I haven’t figured out how to reconcile the last DTS in given month to a related MTS. I have a call in to someone at Treasury who can hopefully explain it, but I won’t be surprised if I don’t get a callback. If I do learn how they tie in and have time (two dubious ifs), I will attempt to do a full-month tie-in for all of April during the first few days of May to get a jump on Treasury’s official release. Anyone else who can save me the trouble is welcome to comment or e-mail me with full credit given.

So, unless I’m not correct to be absolutely, positively, totally, 100% sure (but awfully close), our unfortunate liberal economist friends will have to answer some very uncomfortable questions after it all becomes official at 2:00 PM on May 10. Some of them will include:

• How can tax collections be going up so much when GDP growth during the past year hasn’t been anything special?
• Why haven’t the Bush tax cuts, especially the investment-related ones of 2003, led to the decreases in collections we predicted back then?
• Since Income and Employment Taxes Not Withheld have increased so dramatically, and because we know that this collections in this category primarily come from “the rich,” how are we going to break it to our friends in Congress and the Formerly Mainstream Media that we don’t have to “soak the rich,” because they are allowing themselves to get soaked already?
• What are we going to tell those soon-to-be-former friends in Congress and Old Media when they come to us and ask for projections of how much additional money can be collected if tax rates are increased, when we now know that what will increase revenues even more is another tax-rate CUT (see Ireland, Iceland, Hong Kong, and Estonia [third item at link])?

So have your open arms, and your shoulders to cry on, ready for your liberal economist friends at the appointed hour. Stay with them the rest of the day to make sure they don’t do anything rash. They’ll need the sympathy — followed by a conversion exercise.

It looks like you’ll have a year or so to prepare for another traumatic day the hopefully few remaining liberal economists will probably have to face — Reported Deficit Break-Even Day.

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UPDATE: Holy moly — Brian Wesbury is predicting $390 billion, a mind-bending 25% increase, and he delivers this gem:

As in the 1990s, revenue is being lifted by a productivity-driven surge in incomes, profits, and rising equity prices. As people earn higher incomes, a larger share of their income gets taxed at higher marginal rates - a tax hike without new legislation. Those who argued that the tax cuts in 2001-03 would create deficits as far as the eye could see are being proven wrong. And, unlike the 1990s, the budget will be balanced without the help of a post-Cold War “peace dividend.”

UPDATE 2: The Net from Identified Sources went from $306.2 billion to $311.9 billion on Friday, April 27. $19 billion in collections was largely offset by much larger than (I) anticipated additional refunds of $13.3 billion. Given that extra money usually comes in on Mondays because of the effect of two mail days (Saturday and Monday), I’d say the $327.1 billion projected in this post’s table will be reached, or very nearly reached, in tomorrow’s April 30 report.
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Selected Previous Posts:
- Feb. 13 — What Happens If a Deficit Falls and Almost No One Reports It?
- Feb. 12 — January’s Treasury Report: Supply-Side Econ Rocks On; Surplus in FY09 Appears to Be More Than Possible
- Jan. 12, 2007 — Treasure This: The Deficit is Down by Almost 1/3 from Last Year
- Oct. 8, 2006 — The Federal Budget Deficit: Bush Benchmark Achieved, Ignored
- Oct. 6 — The Best-Kept Secret in Washington The USA
- May 10 — Voodoo Schmoodoo Redux: Supply-Side Econ Works Yet Again
- Jan. 13 — Voodoo Schmoodoo