October 16, 2009

Latest Pajamas Media Column (‘Seeing Red [Ink]‘) Is Up

Filed under: Economy,Taxes & Government — Tom @ 12:32 pm

http://i739.photobucket.com/albums/xx40/mmatters/red_ink(This post, originally published at about 8:30 this morning, was carried to the top after the Update below was completed.)
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It’s here.

It will go up at BizzyBlog on Sunday morning (link won’t work until then) after the blackout expires.

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UPDATE: I made some key points in the second and third Lucid Link items earlier this morning.

What follows extend what I addressed in the column about the decline in withholdings.

Let’s first go back to the origins of the overall slide in collections.

Corporate tax collections were the first to decline. This actually began happening to a relatively modest degree during the fourth quarter of 2007, when such collections decreased 6.3% from 4Q06. Even during 2Q08, a quarter that included April’s all-time collections record (which I have been calling the “Supply Side Stunner” since just before it became official), year-over-year corporate collections were down 14.1%. In the most recent two quarters, they’re down year over year by 57.3% and roughly 38% (pending issuance of the September 2009 Monthly Treasury Statement, which is officially very late), respectively.

Individual payments of estimated taxes, up year-over-year by over 5% in 2Q08, are what drove the “Supply Side Stunner” referenced in the previous paragraph. These didn’t actually begin to decline until 4Q08, and then only by less than 2%. But they cratered during the first half of this year; 2Q09, by far the biggest quarter for this category, came in a shocking 35% lower than 2Q08.

That brings us to withholdings. They shouldn’t decline, as long as people stay employed and are getting at least modest pay increases, so they were the last to go negative. Here is their track record for the last eight quarters (these percentages, including 3Q09′s, are sourced to the Daily Treasury Statements, and shouldn’t be subject to any surprises that might appear in September 2009′s monthly statement):

+8.8% — Quarter ended December 31, 2007 (4Q07)
+1.8% — Quarter ended March 31, 2008(1Q08)
+2.7% — Quarter ended June 30, 2008 (2Q08)
+2.8% — Quarter ended September 30, 2008(3Q08)
-2.0% — Quarter ended December 31, 2008 (4Q08)
-5.8% — Quarter ended March 31, 2009 (1Q09)
-9.3% — Quarter ended June 30, 2009 (2Q09)
-10.1% — Quarter ended September 30, 2009 (3Q09)

The PJM column covered the decline in the most recent quarter, but as you can see, the one before it was almost as bad. You would not expect such steep year-over-year declines to happen when the year-over-year average quarterly unemployment rate has “only” increased by about 3.5%.

But, as stated in the column, these declines are happening, for three reasons:

  • Many formerly high earners are earning much less.
  • Those still working are working fewer hours.
  • Probably less important and not directly related to labor, many investors taking retirement plan distributions are having less money withheld from them.

The positive percentages for withholding collections through the third quarter of 2008 also happen to support my long-held contention that we were NOT in a recession until real GDP began a string of consecutive declines in the third quarter of 2008.

Both the CBO and the White House seem to think that collections will rebound to large degrees in the coming years, and will actually reach $3 trillion by 2012. As long as unemployment stays where it is (most observers both within and outside the Obama White House think it will either do that or get worse for quite a while), and as long as this administration lets taxes increase next year while attempting to impose cap and trade and statist health care, I don’t see how that will happen.

Given the policies this administration is pursuing, I think it’s more likely that collections will continue to decline further by relatively small percentages, and that we’ll have to be quite lucky to see them stay the same or increase slightly.

Lucid Links (101609, Morning)

Filed under: Lucid Links — Tom @ 9:46 am

Sorry Rick Sanchez: Broadcasting lies about what Rush Limbaugh has said from your perch on CNN to millions (oops, I meant “hundreds of thousands“), and then “apologizing” on Twitter doesn’t cut it. What a weasel. Update: Sanchez has apologized; text is at the NewsBusters link. My guess is that a sobering talk with CNN’s legal counsel had some effect. Update 2, Oct. 18: There are lots of commentators correctly pointing out that Sanchez’s apology is inadequate, in that it leaves viewers with the impression that while he (Sanchez) erred in airing a quote that didn’t exist, Rush is still a racist — even though of course there is no evidence of that, because he isn’t. Did I forget to tell everyone that Rush’s call screener is African American?

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It’s the morning on October 16. The Monthly Treasury Statement, normally issued on the eighth business day of the month, is still not out. Today is either the 11th or 12th business day, depending on whether this past Monday was a federal holiday. Fiscal year-end verification sometimes delays the final September statement, which wasn’t released until October 15 last year, the 10th or 11th business day.

The Monthly Treasury Statement is, or was, supposed to be a simple list of monthly receipts and disbursements (i.e., a cash flow statement). But beginning with April’s statement, along with retroactive changes made to previous months, the Obama Treasury decided to corrupt it with “Net Present Value” (NPV) accounting for its “investments” in banks, GM, Chrysler, and other entities. I covered the details of the potential effects of that decision back in May. NPV accounting is important and necessary, but it doesn’t belong in a cash-flow statement.  I believe it’s in there for the sole purpose of reducing the reported deficit by potentially hundreds of billions.

At the moment, the important point to make is that determining the NPV of the government’s “investments,” which should be an accounting decision based on objective judgments concerning the recoverability of the monies “invested,”may have become a political decision. I hope I’m wrong, but it would not surprise me if the delay in getting out September’s statement is due to some squabbling inside the Treasury, perhaps also involving the Congressional Budget Office, over what NPV should be (that’s a hint to AP and others looking for a possible real story). The lower NPV goes, the higher the reported deficit will be. There’s also the possibility that the final statement will be issued late this afternoon in hopes of getting light weekend press coverage of the full-year deficit. CBO says will be “about $1.4 billion.”

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Since there are already so many differences between the reported deficit and the change in the national debt, it may be time to put more emphasis on the monthly growth in the national debt. In fact, I will start doing that now and in future months.

As noted above, the reported deficit is “about $1.4 trillion.”

Using the TreasuryDirect tool found here, I found that after the close of business on September 30, 2009, the national debt was $11,903,588,660,952.03.

On September 30, 2008, the national debt was $10,024,724,896,912.49.

The comprehensive (i.e., actual) deficit for the entire government of the United States of America during the fiscal year ended September 30, 2009 was therefore $1,878,863,764,039 — and 54 cents.

The difference between the reported deficit and the comprehensive deficit will henceforth be referred to as “the hidden deficit.” The past fiscal year’s hidden deficit was roughly $478 billion ($1.878 trillion minus $1.4 trillion).

Anyone who thinks I’m a convenient late arriver to the topic needs to go here.

Positivity: Largest gathering ever in Spain to celebrate feast of Our Lady of the Pillar

Filed under: Positivity — Tom @ 8:08 am

From Zaragoza, Spain:

Oct 14, 2009 / 10:08 pm

Officials in the Spanish town of Zaragoza confirmed this week that Monday’s celebration of the feast of Our Lady of the Pillar was the largest in history, with some 450,000 faithful passing before the venerated statue that represents the country’s most popular Marian devotion.

The Spanish newspaper La Razon quoted city official Jeronimo Blasco, who said, “The traditional flower offerings to Our Lady of the Pillar were the longest and largest in history: they lasted eleven hours, from seven-thirty in the morning to six-thirty at night, with some 450,000 who came to place flowers before the monument.”

Good weather and the long weekend made the large numbers possible, the newspaper reported, adding that many immigrant groups, from Africans to Japanese, also came to express devotion to the Blessed Mother.

“More than 400 groups took part in the procession, with some 25,000 people moving through the line per hour, leaving more than seven million flowers at the feet of the patroness of Spain. ….

Go here for the rest of the story.