The 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:
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 BizzyBlog.com.