May 12, 2010

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:


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):


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



  1. Of the articles I read about the April, 2010 deficit, many of them cited the 2009 tax settlement that occurs on April 15th for individuals. But not one mentioned that tax receipts from individuals include the first installment of 2010 estimated taxes. Historically individual estimated taxes are what drives the usual surplus months. Take a look at Treasury’s “Monthly Receipts, Outlays, and Deficit or Surplus” (1981-2010) at or at A deficit in April bodes ill for receipts in June, September and January.

    Comment by LilyS — May 12, 2010 @ 6:24 pm

  2. #1, thx for the info and link (FMS is making navigation and info access more difficult, it seems). I’ve got another post in the works that is going to bring up the est’d tax point.

    Now that we have MTS, we see for April 2010 in comparison to April 08 (chart will be in the next post) that:
    - Individual income taxes are down 56% (-33% YTD). The fact that this is WORSE than average so far this year means, as you noted, that June and Sept. do not look promising at all.
    - Corporate income taxes are down 45% (-55% YTD).
    - Social Security/Medicare taxes are down 3%, just as the Baby Boomers are hitting Social Security retirement age (-4% YTD).

    Heckuva job, Barry.

    Comment by TBlumer — May 12, 2010 @ 7:10 pm

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