July 9, 2010

CBO Notes YTD Deficit Tops $1 Trillion; Reality Is Much Worse

Filed under: Economy,Taxes & Government — Tom @ 12:21 pm

BudgetEconomyOn Wednesday, the Congressional Budget Office released its Monthly Budget Review for June. It estimated that June’s deficit was “only” $69 billion, down from $94 billion last year, and that the deficit through nine months of the current fiscal year is $1.005 trillion, down from last year’s $1.087 trillion.

June’s single-month improvement — or more properly stated, its less disastrous result — is probably legitimate, because collections have picked up a bit. But, as I noted in April (at NewsBusters; at BizzyBlog), the reported year-over-year deficit reduction, such as it is, has nothing to do with anything resembling control of government spending.

This was my explanation at the time, which still holds, and which you will more than likely not see in any media coverage of the government’s financial situation when the Treasury Department releases its official monthly statement next week:

Most of the general public believes that the government is reporting its results on a cash basis, i.e., that “receipts” means “money that came in” and that “outlays” means “disbursements.” Until early last year, with one very small exception, that was the case.

But that’s so pre-Obama. Since Treasury converted TARP and other bailout programs (with the exceptions of Fannie Mae and Freddie Mac) to Net Present Value accounting last year, this is how things roll:

  • When the government “lends or invests” in banks and auto companies, the monies disbursed are treated as “investments,” and are included in “outlays.”
  • Assuming no impairment in value or collectability, there are no receipts when the original amounts “invested” are repaid. Interest or dividends received are treated as “receipts” (euphemistically called “transfers from the Federal Reserve” by our oh-so-transparent Treasury).
  • But if it looks like some of the “invested” funds won’t be repaid, the government will write down the value of those investments to what it thinks will be repaid.
  • If it overestimates the impairment, it revalues its investments upward, and reduces reported “outlays.” This is what happened in March, to the tune of $115 billion.

In essence, what happened is that the administration pushed as much “bad news” (asset writedowns) as it could into last year’s financial reporting, since last year was going to be a disaster no matter what. But since they overdid it with the writedowns last year (“Gosh, how did that happen?”), they can make this year look better than it really has been.

With that explanation as background, here is a comparison of what CBO presented with what things really look like when the $115 billion above is put in its proper place, i.e., last year (changed line items are in red boxes):

CBOrecsOutlaysDeficitAdjusted0610

Real spending is over 6% higher than last year’s already ridiculous total. The adjusted deficit after putting the accounting estimate described above where it belongs, has increased by over 15%.

This will be important to remember, because if the Obama administration continues to suffer from its “Recovery Summer” delusion, you can expect to hear the President and his apparatchiks claim that they are already starting to reduct the deficit, and their statist-compliant establishment media buds to relay the “news” without skepticism. The truth is that they’re reducing nothing — except, the longer their fiscal mismanagement goes on, our capacity to respond to their continually building disaster.

Cross-posted at NewsBusters.org.

At Heritage: ‘Obama Is Anti-Business’

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 10:06 am

Readers here will say, “What else is new?”

What’s new is that a lot of people who should have known better — and would have known better, had they paid attention to the myriad warnings from the center-right new media for almost two years before the 2008 presidential election (or perhaps their hubris led them to believe “we can work with him anyway”) — have figured it out (internal links are in original):

It looks like the Obama spin machine is at it again, this time launching a concerted effort to rebut reports this week that President Barack Obama is anti-business. But given Obama’s record of stoking government intervention in the private sector and creating an environment of uncertainty poisonous to business growth, hiring and expansion, it’s no wonder the President is branded with an anti-business scarlet letter.

The storyline began in The Washington Post, where columnist Fareed Zakaria endeavored to find out why America’s 500 largest nonfinancial companies are sitting on $1.8 trillion in cash, rather than spending it on expansion (which would mean new jobs). Business leaders told Zakaria that it comes down to economic uncertainty surrounding new laws, regulations and taxes; the expansion of federal agencies’ authority; and the unknown implications of Obamacare, financial reform and cap-and-trade. And the kicker? Zakaria notes that most of them had voted for Obama yet all of them now believe he is “at his core, anti-business.”

Others joined the chorus, too. Verizon CEO Ivan Seidenberg said, “By reaching into virtually every sector of economic life, government is injecting uncertainty into the marketplace and making it harder to raise capital and create new businesses.” And then there’s Jeffrey Immelt, chairman and CEO of General Electric, who reportedly said of Obama, “business did not like the U.S. president and the president did not like business.” The only surprise here should be how long it’s taken business leaders to speak out about Washington’s runaway train intervention in the marketplace, all in the name of creating new jobs.

Under President Obama, that intervention began with an $862 billion stimulus, and it was joined by a failed Cash for Clunkers program, a government takeover of the domestic auto industry, a bailout of Fannie and Freddie that may hit $1 trillion, a visceral attack on private sector compensation, a government takeover of health care and, now, financial regulation reform which is said to be riddled with unintended consequences. What next? Cap-and-trade hangs heavily on the horizon, as does the prospect of a value added tax, which Heritage’s J.D. Foster says will “recast the nation into a full state of dependency on Washington.”

The whining from GE’s Inmelt is particularly risible, given his 12 visits to the White House and his attempts to make his company perhaps the largest beneficiary of the Obama regime’s crony pseudo-capitalism. What he’s really saying is that he’s upset that everyone else isn’t willing to play along like GE so obviously is, and that maybe our Punk President and his Institutionalized Gangster Government would treat business better if they did. Sure Jeff.

Let’s just hope that for the rest it’s not too little too late, that it’s sincere, and that they can’t be bought off by ever more opulent de facto corporate welfare. All three items are in doubt.

Latest Pajamas Media Column (‘Mapping the Man-cession’) Is Up

Filed under: Economy,Taxes & Government — Tom @ 8:44 am

MenNotWorkingIt’s here.

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

The column explores some of the causes of the current 2.1-point unemployment gap between men (a reported seasonally adjusted 9.9% for 20-and-overs) and women (7.8%), and suggests several solutions.

The gap got significant (over a half-point) in July 2008, the first full month of the POR (Pelosi-Obama-Reid) economy and of the recession as normal people define it. It has been as high as 2.5 points — far higher than during any previous recession or downturn in the six-plus decades of available records — and seems to be getting worse again.

The May-June increase in the gap from 1.7% to the just-mentioned 2.1% may foreshadow the double-dip recession more people are beginning to see on the horizon.

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Related Good News for (Mostly) Men:

A federal appeals court yesterday rejected the Obama administration’s effort to reinstate a deepwater drilling moratorium while it challenges a ruling halting the ban.

The decision, by a three-judge panel of the US Circuit Court of Appeals for the Fifth Circuit, opens the door to resumed drilling in the Gulf of Mexico while the legal fight continues.

Though some damage to our offshore drilling capabilities has already occurred since the moratorium was impoed, the ruling means that many affected oil industry workers, most of them men, won’t be losing their jobs.