May 12, 2010

AP Won’t Dare Compare: April Deficit Report Ignores Huge April ’07 and ’08 Surpluses, Covers Up Chilling Receipt Drops

stock_graph_down_arrowThe comparison of the results contained in the April 2010 Monthly Treasury Statement released this afternoon to April of last year is bad enough. But if the American people knew that April 2010 came in about a quarter-trillion dollars worse than both 2007 and 2008 with almost 40% less in tax collections, most of them would be appalled. Many more than are already doing so would be questioning what in the heck this administration and Congress are up to.

That’s why you probably won’t see establishment media outlets like the Associated Press go back more than one year in their detailed comparisons, even though during the presidency of George W. Bush, writers like the AP’s Martin Crutsinger and others frequently went back to fiscal 2000 and 2001 to remind readers of the surpluses that occurred during those fiscal years. The intent, of course, was to imply that things were just peachy keen under Bill Clinton until the eeeeevil Bush ruined everything. As noted later, that ain’t so.

Here is the AP’s Crutsinger on today’s Treasury Statement, blissfully pretending, with the exception of one cryptic reference, that the two high-collection Bush years neeeeeeeever happened:

The federal budget deficit hit an all-time high for the month of April as government revenue fell sharply.

The Treasury Department said Wednesday the April deficit soared to $82.7 billion, the largest imbalance for that month on record. That was significantly higher than last year’s April deficit of $20 billion and above the $30 billion deficit private economists had anticipated.

The government normally runs surpluses in April as millions of taxpayers file their income tax returns. However, income tax payments were down this April, reflecting the impact of the recession which has pushed millions of people out of work.

Total revenues for April were down 7.9 percent from a year ago, dipping to $245.3 billion.

… The trillion-dollar-plus deficits are being driven by the impact of the recession, which has cut government tax revenue while driving up spending.

Analysts estimate that roughly one-third of the increase in the deficits over the past two years came from lost revenue — the result of fewer people working and lower corporate profits. Another third is from increased government spending that normally occurs in a downturn, such as higher payments for unemployment benefits and food stamps. The final third reflects the added government spending on the $787 billion stimulus bill and the $700 billion financial bailout.

Crutsinger mentioned “the past two years” in the last excerpted paragraph and had a golden opportunity to tell readers the degree of the difference between this year and 2008, but did not. When you see how big the difference is, you’ll totally understand why:

USTmtsDeficits0407to0410

Since Crutsinger has already used up the word “sharp” to describe April 2010′s collections decline vs. April 2009 of 7.9%, what adjective would he have employed to describe the 39.3% drop from April 2008, or the 22.6% decline in year-to-date receipts?

By far, the most troubling pair of numbers in what’s presented above is April 2010′s individual income tax collections ($107.3 billion) vs. April 2008 ($244.0) billion. That’s a 56% drop. It’s the most troubling because, as a BizzyBlog commenter pointed out earlier this evening, that April number includes two things besides withheld income taxes: “the 2009 tax settlement that occurs on April 15th for individuals” and “tax receipts from individuals … (for) the first installment of 2010 estimated taxes.” The commenter added that “Historically, individual estimated taxes are what drives the usual surplus months.” I should also note that the commenter saw no mention in media reports of the estimated-tax component.

What this means is that as a group, quarterly tax-filers (largely entrepreneurs, businesspeople, and investors) had such a bad 2009 that during 2010 they will mostly be making low required quarterly payments (generally 25% of last year’s liability each quarter). As a result, collections in June and September, which like April are usually months pretty flush, will more than likely also be weak.

One of two things could happen next with this group:

  • Ultimately, if they really do have a good 2010, they’ll owe and pay in a lot of money in January and April of 2011.
  • But if they do not have a good 2010, and if they continue to nowhere near the kind of money they were making in 2007 and 2008, the downward slide in collections from the economy’s most productive people will continue into 2011.

As much as I’d like to believe the former scenario, it’s hard to see it happening.

Now let’s take on Crutsinger’s read on the source of the annual deficit changes. The fiscal 2008 deficit was $455 billion, while the current-year deficit is on track to be roughly $1 trillion higher. Breaking that down:

  • Lower receipts account for something between 40% and 50% of the difference, and certainly not “roughly one-third.” Fiscal 2008 collections were $2.523 trillion (that’s actually low, because in a bad accounting move about $90 billion in 2008 stimulus payments were subtracted from that, but we’ll stay with Treasury’s number anyway). Fiscal 2009 collections came in at $2.105 trillion, or $418 billion lower (that’s 41.8% of $1 trillion). As seen above, fiscal 2010 receipts thus far are running $57 billion behind fiscal 2009. If there is no further decay in the final five months, fiscal 2010 collections will trail fiscal 2008 by $475 billion (i.e., 47.5% of $1 trillion). Further decay in year-over-year collections could cause the 2010 v. 2008 gap to be $500 billion or more (i.e., 50%).
  • We can only wish that Crutsinger’s claim that “another third” comes from “increased government spending that normally occurs in a downturn.” It just isn’t so. Food stamp and unemployment comp increases, though annoying in many ways, make up a small percentage of the Obama administration’s spending increases. For example, Health and Human Services is on track to spend $164 billion in fiscal 2010 than it did in fiscal 2008. Most of that has to do with Social Security and Medicare, and very little of it has to do with the recession (which Crutsinger refers to as if it’s still ongoing). Defense spending, however meritorious and of course unrelated to the recession, is heading towards a fiscal 2010 total that will be about $80 billion higher than fiscal 2008. Projected spending in smaller departments whose spending is not at all recession driven is on track for at least another $100 billion. I’m already at $344 billion, or over “another third” that has little or nothing to do with the recession. The problem is that the administration has ratcheted up spending almost across the board.
  • TARP and other bailouts, as offensive as they are, make up a relatively small percentage of the total deficit change, and certainly not “a final third,” especially when their total costs are spread over two fiscal years.

Crutsinger also failed to mention that the Congressional Budget Office estimated last Friday that April’s deficit would be $85 billion and essentially nailed it. Why the AP’s consulted economists totally blew the call, as noted earlier today (at NewsBusters; at BizzyBlog) is a mystery.

As to those 2000 and 2001 surpluses referred to earlier, the Clintonian mythology ignores the fact that the Republican Congress during that period, led by the likes of then-Congressman John Kasich, created the conditions for the late-1990s prosperity and the federal budget surpluses that eventually arrived in 2000 and 2001. In an unaccountable lapse, an unbylined May 2009 AP report (original saved here for fair use, discussion, and establishment media torture purposes) acknowledged this inconvenient fact.

Clinton’s “contribution” was to overheat the economy, as his Securities and Exchange Commission allowed start-up and mostly Internet-based companies that barely had a business plan and had never earned a dime of revenue to go public as if they were the type of company suited to ordinary investors instead of wealthy, accredited ones (yes, ordinary investors also deserve a healthy slice of the blame).

Two years after the “Supply-Side Stunner,” the name yours truly gave to the all-time one-month collection record of April 2008, a journalistically negligent one-year comparison window employed by the AP and Crutsinger enabled the wire service to avoid properly rendering just how awful the government’s financial situation is now compared to then. As bad as it looks as AP rendered it, it’s clearly much, much worse.

Cross-posted at NewsBusters.org.

Deficit Comes In Just Below CBO Estimate; Economists’ Predictions Were Way Low. Why?

logo_mtsIt doesn’t seem like this exercise should be that tough.

The government issues Daily Treasury Statements telling everybody what went in and out on a given business day. At the end of the month, the last Daily Treasury Statement has a record (admittedly jumbled and larded with lots of bureaucratic excess) of all receipts and disbursements for the month.

The folks at the Congressional Budget Office look over the final Daily Treasury Statement and estimate what the totals for receipts and disbursements (or “outlays”) will be. The difference, obviously, is their estimate of the month’s reported deficit. The only remaining items should be error corrections (if any), or accounting entries resulting from the government’s ill-advised choice to account for “investments” in banks, car companies, and other entities on a “net present value” basis.

On the eighth business day of the following month, the Treasury Department releases its Monthly Treasury Statement.

On Friday, the CBO estimated that the April’s deficit would be $85 billion. The press (as covered at NewsBusters; at BizzyBlog) virtually ignored its report. That’s bad enough, but when reporters went out to economists for deficit estimates, their predictions were significantly lower. For starters, here’s what the Associated Press carried this morning:

APmorningDeficitPredix051210

The AP’s $30 billion consensus sharply differed CBO’s estimate, yet the rest of the AP’s report failed to even acknowledge the existence of the variance, or for that matter of the CBO.

Other news sources also came in with lower April deficit estimates, but not by as much as AP’s:

Well, here’s the relevant portion of April 2010′s Monthly Treasury Statement that was released today at 2 PM. We can see who was closest (figures are in millions):

MTSdata0410

CBO overestimated the deficit by only $2.3 billion.

As stated earlier, unless there are “net present value” entries, estimating the deficit shouldn’t be that tough, as CBO has just demonstrated. So why was there such an across-the-board lowball consensus among the economists consulted by the press?

All I’ll say is that it’s mighty, mighty convenient that the early morning drive-time, get-ready-for-work reports based on the AP item above told radio and TV audiences that the year-to-date deficit would come in “about 7% lower than a year ago.” The fact is that it has barely budged (the $799.7 billion above is only $2.6 billion lower than last year’s $802.3 billion). After considering the $115 billion non-cash item noted in the last paragraph of the AP excerpt above, the true cash spending deficit is about $915 billion, or 14% higher than last year’s year-to-date figure.

All of this is likely to get ignored in the rush of other afternoon and evening news, leaving many listeners and viewers believing that the government’s financial situation is improving. It isn’t. Again, how convenient.

Now that the Monthly Treasury Statement has been published, I’ll have more to say about the establishment media’s coverage in a later post.

Cross-posted at NewsBusters.org.

Lucid, Lickety Split and Lightning Links (051210, Morning)

Filed under: Lucid Links — Tom @ 9:28 am

Lucid Links:

_______________________________________________________

Apparently this is what passes for good news these days –

…. delinquencies on so-called ‘Alt-A’ residential mortgage-backed securities declined to 34.1 percent in April from 34.4 percent in March – marking the first month-over-month decline in that category since April 2006.

Here’s yet another reminder that will apparently need to be made from time to time for quite a while, or at least as long as Fannie Mae and Freddie Mac continue to receive relief without limits (from Petter Wallison in the December 29, 2009 Wall Street Journal):

New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A.

In general, a subprime mortgage refers to the credit of the borrower. A FICO score of less than 660 is the dividing line between prime and subprime, but Fannie and Freddie were reporting these mortgages as prime, according to Mr. Pinto. Fannie has admitted this in a third-quarter 10-Q report in 2008.

George W. Bush didn’t deceive the markets and the ratings agencies for roughly a decade and a half. (*) Democrat cronies Franklin Raines, James Johnson, and others did. The housing and mortgage lending messes are on them, and them alone.

(*) – to the tune of trillions of dollars

_______________________________________________________

Here’s the latest from the absolute propagandists at the Associated Press — “Political patience wanes as Gulf oil spill grows”. Its theme is that all of the pressure is on BP and other companies involved.

Nice try guys, but no sale. Blaming it all on BP and other private companies doesn’t change the fact, as noted yesterday (third Lickety-Split Link) and earlier (here and here), that the federal government was not prepared to do what it has been charged to do per its own National Contingency Plan. Maybe someone at AP should go and read it.

The government had the discretionary power to burn away the problem early, but either couldn’t or wouldn’t do it. That’s not BP’s fault.

___________________________________________________

The number of senior Democrats throwing in the towel or being ousted in primaries should properly be seen as the Party’s (and the party’s primary voters’) internal attempt at preventing a sinking ship from totally submerging by throwing any and all “excess baggage” overboard.

The latest “victims” are David Obey of Wisconsin, who “chose” to retire, and Allan Mollohan of West Virginia, who was defeated yesterday in that state’s Democratic Primary.

Inserting substitutes into vulnerable races where incumbents once seen as invincible appear to be in big trouble six months before the general election is clearly being done in the interest of preserving Nancy Pelosi’s majority at all costs, decades of party loyalty be damned. The newbies will, as did Ohio’s Steve Driehaus in 2008, pretend to be “moderate” when they’re substantively every bit as radical as the President himself (Driehaus isn’t genuinely prolife, voted for cap and trade, and voted for the non-stimulating stimulus, so where’s the difference between Driehaus and Obama?).

Which leads to the question: How many once secure Democratic incumbents should have been smart enough to realize that by supporting Barack Obama for president in 2008 they were signing death warrants for their own political careers?

Stated differently, the free media pass Obama’s hard-core radicalism received during the presidential campaign may have fooled more than the nation’s voters.

*******

Lickety-Split Links:

It will be interesting to see whether the federal budget deficit for April, which the Congressional Budget Office estimated will be $85 billion last week, comes in closer to that figure or the $30 billion that “Economists surveyed by Thomson Reuters are predicting,” according to the Associated Press.

That’s a really big difference so close to the actual release. A link to the report can be found here at 2 p.m.

___________________________________________________

Minnesota Governor and potential presidential candidate Tim Pawlenty has vetoed a soak the rich income tax. As usual, the press coverage makes an unsupported assumption:

More than 122,000 high-income taxpayers would pay the new 9.1 percent tax, which would go away if the state started running a surplus. Democrats said it would stave off additional cuts to state services for vulnerable residents and ease financial pressure on schools.

The bolded statement acts as if the number who would pay the higher rate is an established fact. It’s not, because some of them, even in the Land of 10,000 Taxes, might very well vote with their feet and leave the state.

___________________________________________________

From the “You Can’t Make This Up” Dept. –The coverage is being really careful not to frame it so obviously, but the bottom line of stories such as this one (“Obama presses Spain’s Zapatero over economic reform”) is that the President of a country running trillion-dollar annual deficits (Obama, USA) is pressuring the leader of a country (Zapatero, Spain) whose entire gross domestic product is $1.5 trillion ($1.556 trillion at link less expected 2009 shrinkage of 4%) to cut its budget deficit by reducing spending.

*******

Lightning Links:

  • Mr. Civility My A** — “President Obama: GOP Opposition to Stimulus ‘Helped to Create the Tea-Baggers‘”
  • At BigJournalism.com“Media Take Note: In Arizona County, Of 64 Highway Chases Last Month, Not One Perp (Was) a U.S. Citizen”
  • At Powerline (“Don’t Leave It to Cleaver, Part 16″) — McClatchy’s official response to allegations that it reported something that never happened, naming the hurling of racial epithets at African-American House members on March 20, “appears (to be) nothing more than bravado and deception.” Well, that’s because it really is something that never happened.

Positivity: Minor league hockey saves Rapid City man’s life

Filed under: Positivity — Tom @ 7:45 am

From Rapid City, South Dakota:

Posted: Wednesday, May 12, 2010 5:00 am

Members of the Rapid City Rush made their best save of the year on April 24. And it was Jim Nolan’s love of the hockey team that saved his life

Early that evening, Nolan, who hadn’t been feeling well, decided to go to bed early. But the hockey fan in Nolan became restless; he just had to get out of bed to check the score of the Rush playoff contest with the Allen Americans.

It was then that he collapsed.

His wife, Bobbie, heard the sound as Nolan, 70, fell onto the desk, a chair and then crashed to the floor. She rushed to her husband side, called 911 and began cardiac pulmonary resuscitation. Nelson’s fall had wedged him between the chair and computer desk.

Jim’s son, Steve, is convinced that had his father remained in bed or out of the hearing distance of his mother, “it would have been fatal as it all would have been silent.”

“I think so,” Bobbie Nolan, said. “If he hadn’t gotten out of bed to check the score, I would not have heard him. That was the very fortunate thing.”

On Tuesday afternoon, Derek LeBlanc, Jamie VanderVeeken, and Luke Fritschaw of the Rush visited Jim and Bobbie Nolan at their home.

“That was exciting,” Bobbie Nolan said.

It was pretty special that they showed up today,” she said of the players.

“Wow,” Jim Nolan said of the visit.

The happiness brought by the visit by the Rush players was a far cry from the fear the family felt that night in April. …

Go here for the rest of the story.