There are predictable signs that after eight years of giving the problem inadequate attention and occasional ridicule, the business press has decided that federal budget deficits and the national debt are going to start to matter again. Gosh, I wonder why?
The Associated Press's Christopher Rugaber was relatively subtle about it in a report on Uncle Sam's December and year-to-date budget deficits on Thursday. As would be expected, Paul Krugman wasn't subtle at all in his latest New York Times column.
Here are several paragraphs from Rugaber's dispatch (bolds are mine):
US BUDGET DEFICIT NEARLY DOUBLES IN DECEMBER FROM YEAR AGO
The U.S. federal government's budget deficit rose from a year earlier for the second straight month, the latest sign of a rising financing gap.
The Treasury Department said Thursday that the December budget deficit was $27.5 billion, nearly double the $14 billion in December 2015. In the first three months of the government's budget year, the deficit is slightly below last year's total. But adjusting for calendar quirks that moved some large benefit payments into September, the deficit has worsened in the past three months.
The adjusted deficit for October through December was $230 billion, up by nearly one-third from $174 billion a year ago. The federal government's largest health care programs, Medicare and Medicaid, saw spending increase 5 percent and 6 percent, respectively.
What's strange here is that the AP has rarely referenced calendar "quirks" in its coverage of the Treasury Department's monthly budget reports, has almost never quantified them, and as far as I know, has never reported the adjusted year-to-date amounts without at least also disclosing the official figure (it's $208 billion, and Rugaber didn't disclose it).
But for the failure to disclose that official figure, one would be tempted to congratulate AP on improving the quality of its coverage of this government report. But it's more than a little odd that Rugaber decided to be so conscientious in covering the last report before the White House changes hands, and more than a little coincidental that the adjustments for such "quirks" (explained in more detail at the January release of the Congressional Budget Office's Monthly Budget Review) caused the adjusted deficit to be significantly higher. (Another factor here is that longtime AP veteran Martin Crutsinger, and not Rugaber, has typically covered the government's monthly budget results; Crutsinger typically has not addressed timing "quirks.")
Rugaber then focused on the receipts and outlays during the month of December, and did not comment at all on year-to-date figures for either metric. This is unfortunate, because the year-to-date news is not good, and it's indicative of both a flat economy and an Obama administration government spending machine which continues to run out of control.
Here is the chart on spending, adjusted for timing differences (figures were estimated by CBO before Thursday's official release, but differ from actual results by very minor amounts; some minor rounding differences are present):
Thus, after adjustments, the government was spending at a rate of $4.06 trillion per year during the current fiscal year's first quarter, greatly eclipsing the record spending level of $3.85 trillion seen in fiscal 2016. That figure in turn was far higher than fiscal 2015's $3.69 trillion and fiscal 2014's $3.50 trillion. So the government is on a pace to increase spending this year by almost 16 percent compared to three years ago — even with defense spending falling by 1.5 percent during that period.
That's unsustainable, especially because in the major categories, year-over-year receipts, even ignoring a change in how the Federal Reserve remits its earnings on its massive "quantitative easing" borrowings, are flat:
Flat income tax receipts are symptomatic of a flat economy. The year-over-year increase in payroll tax collections is due to more people working, combined with pay increases granted to those who are working. That increase would be far greater if it weren't for the fact that wage increases have been so weak for years, and are only now, 7-1/2 years into a "recovery," starting to push 3 percent. Corporate tax receipts fell in fiscal 2016 by 13 percent, and that trend has continued into fiscal 2017.
What all of this means, barring a major turnaround, is that CBO's most recent long-term budget projection, last issued in August, vastly understated the eventual full-year fiscal 2017 deficit.
CBO estimated a full-year deficit of $594 billion. That prediction heavily depends on an increase in collections of $145 billion over fiscal 2016. Considering the above analysis, plus a one-time, $25 billion quantitative easing-related hit (not presented above), receipts are on track to come in about $170 billion below CBO's projected figure. Meanwhile, spending appears to be on track to exceed CBO's projection by about $40 billion.
If these trends pan out, we're looking at President-Elect Donald Trump inheriting an $804 billion full-year 2017 deficit ($594 billion, plus the $170 receipts shortfall, plus the $40 billion in extra spending). If form holds, the left and the press will present this and other sharp increases in future-year projected deficits, which are clearly the responsibility of the Obama administration and previous Congresses which have allowed matters to once again deteriorate so badly, as a big February "surprise" — and the blame will be dumped on President Trump.
Also, if form holds, the national debt will continue to grow by amounts that exceed reported budget deficits. During the fourth quarter, the national debt grew by a budget deficit-dwarfing figure of $403 billion, ending calendar 2016 at $19.976 trillion.
So where has everyone, especially in the press, been during the past two years? Well, Paul Krugman at the New York Times spent the past seven years demanding that the government borrow even more. Readers may even recall that he believed that the Obama administration's $800-plus billion "stimulus package" was way too small.
Where is Krugman now? Of course, now he's telling us that deficits matter.
Here's the graphic evidence of Krugman's sudden sea change:
I'll spare readers any detailed analysis of Krugman's obviously hyper-partisan, hyper-hypocritical, hyper-Keynesian nonsense, except to say that, as usual, deficits driven by government spending are automatically good, but ones based on tax cuts are automatically awful.
Cross-posted at BizzyBlog.com.