In his coverage of yesterday's Monthly Treasury Statement from Uncle Sam, the Associated Press's Martin Crutsinger, who I have criticized frequently for cruddy reporting, especially on federal finances, did a pretty good job reporting key facts and conveying very real concerns that are brewing over the country's current fiscal path.
In the process, he made a stunning admission about the economy's situation that has to be seen to be believed.
I find myself concerned that the previous paragraphs might cause Mr. Crutsinger to get called into a closed-door meeting where he gets asked what in the world is going on. If that happens, I have an agenda item he can bring up. I'll get to that later.
Crutsinger's only serious error was his final paragraph's mischaracterization of deficit trends during the Bush administration.
Anyway, here are key paragraphs from Crutsinger's mostly un-cruddy report (bold after title is mine):
December budget deficit sets record
The federal budget deficit hit an all-time high for the month of December, and the red ink for the first three months of the current budget year is rising at a more rapid pace than last year's record clip.
The massive tide of red ink, reflecting the continued fallout from a deep recession and a severe financial crisis, highlights the challenge facing President Barack Obama as he pledges to get control of runaway deficits.
The Treasury Department said Wednesday that the deficit last month totaled $91.85 billion, the largest December deficit on record. The figure was in line with economists' expectations.
For the first three months of the current budget year, which began on Oct. 1, the deficit totaled $388.51 billion, 16.8 percent higher than the $332.49 billion imbalance recorded during the same period a year ago.
Last year's deficit surged to $1.42 trillion, more than three times the record of the previous year, an imbalance of $454.8 billion set in 2008.
.... The Obama administration is projecting that this year's deficit will climb even higher to $1.5 trillion, which would be 5.6 percent higher than the 2009 deficit.
.... economists warn that the government's financing costs will begin rising sharply once the recovery begins and the Fed starts raising rates to make sure inflation does not get out of control.
Foreign governments, including China, the largest holder of U.S. Treasury securities, have also expressed concerns about the outlook for deficit reduction in coming years.
.... While the administration is pledging to work to improve that deficit outlook, private economists wonder whether Obama will be able to break the political gridlock that has prevented a significant attack on the deficits even before the recession made them worse.
The "once the recovery begins" phrase I bolded above is a mind-blower. Crutsinger is telling us, despite what his colleague Jeannine Aversa recently wrote about the economy's "rebound," that the recovery hasn't begun. Pass the smelling salts.
Sure, we're supposedly into the seventh month of economic growth since the recession as normal people define it ended with the positive growth that occurred during the third quarter of 2008. But that 2.2% annualized growth was largely driven by government spending and government tax breaks. Though those items are probably still heavily influencing more recent growth, the financing constraints Crutsinger cites could render that administration strategy unsustainable in short order.
The AP reporter's last paragraph about the lack of a "significant attack on the deficits" is factually incorrect:
- In the wake of 2001's sort-of recession (as normal people define a recession, there never was one) and the financial impact of the 9/11 terrorist attacks, the administration promised that it would cut the deficit, estimated to be over $500 billion at the time of that promise, in half by the time the president left office.
- Thanks primarily to the income- and investment-related tax cuts of 2003, which grew federal receipts by over 40% in next four years, the Bush administration was able to keep that promise despite insufficient spending restraint three years early, as fiscal 2006's reported deficit was $250 billion. Fiscal 2007, reflecting the fiscal priorities of the final session of the Republican-controlled Congress in 2006, came in with a reported deficit of $162 billion.
- The government was on track to do even better in subsequent years, but it's clear in retrospect that the Democratic takeover of Congress after the 2006 elections ended any hope of further improvement.
Crutsinger is wrong to claim that there was no "significant attack on the deficits" during the Bush administration.
Here's my agenda item for the possible meeting into which Mr. Crutsinger may be called for his excessive honesty and accuracy: After his dress-down, Martin should ask his superiors for permission to tell readers how much the national debt went up during the periods covered. If he had done this work in his most recent effort, he would have found, using this Treasury Department tool, that:
- During December, the national debt went from $12.11 trillion to $12.31 trillion an increase of roughly $200 billion, which is about $108 billion greater than December's reported deficit of $92 billion.
- During the first fiscal quarter, the national debt went from $11.91 trillion to $12.31 trillion an increase of $400 billion, which is about $11 billion greater than the first quarter's reported deficit of $389 billion.
He could then go on to briefly explain why the differences occurred. The nearly indecipherable accounting for the Troubled Asset Relief Program plus factors I cited several years ago would come into play.
Better yet, Martin should probably just do this without asking. Given that the info might be seen as unfavorable to the current administration, AP boss Tom Curley and Co. would probably say no.
Cross-posted at BizzyBlog.com.