US 2016 Cash Deficit

I’m posting this way late, but the 2016 cash deficit came in at $697B breaking a 6 year streak of improving deficits and topping 2015’s deficit of $539B.


For years now revenue has been saving the day increasing faster than expenses and slowly whittling away at the size of the deficit. That streak ended in 2016 with a $55B 1.6% year over year decline. It wasn’t all bad news though, as the base of taxes withheld from paychecks actually increased 3.7%, but was offset by decreases in corporate taxes, unwithheld taxes, and a handful of one off items that boosted 2015 but did not happen again in 2016, with the 2015 spectrum auction that provided $35B cash being the largest that comes to mind. Thinking back to 2015, this shouldn’t come as a huge surprise, as while 2016 looked ok, it was basically a really good first 4 months of the year followed by 8 months that were essentially flat….and that trend carried over into the full year for 2016.


Outlays were up $104B for the full year, a 2.6% gain that was pretty much in line with my 3% estimate despite some favorable timing that pulled some 2016 outlays into the end of 2015. Nothing especially exciting here, but there usually isn’t….just a slow march up and to the right. Social Security, Medicare, and Medicaid combine for 46% of the total spend at $1.889T and look like they are increasing at about ~4% a year. Also interesting, external interest was essentially flat year over year despite the public debt outstanding increasing $762B. The mechanism for that is of course that we are seeing some of the longer dated debt with higher rates be paid off, and refinanced at the current low rates. The weighted average rate looks like it is about 2%…not too shabby but keep an eye on it in 2017 if we get a few more quarter point raises it could start adding up to big bucks going forward.


After six years of improvement we are headed back up toward $1T despite never getting closer than $539B of a balanced budget. In all fairness, going back four years, the deficit has been far lower than I had initially expected thanks to the tax hikes and moderate economic growth. Alas, it does not appear there will be a plateau, but more than likely a race to $1T and beyond.


If all else were equal, I would probably make a wild guess that in 2017 revenues would be up 2% and outlays would be up 4%, pushing the deficit up to about $800B for 2017. However, the 2016 election adds a lot of uncertainty to that. First and foremost, tax cuts seem to be on the table for both companies and individuals. Unfortunately, it will likely be summer before any of those plans make their way through congress and in the meantime, the government withholding is at the same old 2016 rates. On the outlays side, there is clearly an apetite to spend on some infrastructure projects, but even a $16B wall spread over a few years isn’t enough to make a noticeable increase in spending, especially is we get some small piecemeal savings with some cuts elsewhere….I wouldn’t expect anything actually material to be cut, but I would expect lots of political theater from both sides of the aisle.  For now, since details are short I will stick to the $800B deficit forecast but note that tax cuts could possibly increase that by another $100B or so depending on the timing and the actual cuts that get passed.

Seeking Alpha Links

Hey guys…just wanted to give everyone a heads up that I’ve been writing for Seeking Alpha…if you are interested check out the links below. So far, mostly about oil and stocks, but hoping to slip some deficit articles in at some point as well.

Data Download: Petroleum Inventories Decline 7 Million Barrels

Kinder Morgan’s $1 Billion A Year Honey Pot Runs Dry In 2021

If you enjoy it…sign up to be a follower and you will get updates every time an article is published.




US Cash Deficit October 2016

The US Cash Deficit for October 2016 came in at $45B for the month, bringing the year through 10 months to $526B.



Revenues were up 4% climbing $9B to $245B compared to last October’s $236B. That’s fairly impressive especially on the back of withheld taxes being up 8%, all on one less business day than last October. For the year, revenues are still down $23B, certainly within striking distance to top last year, but still almost certain to be a poor showing for the year even if we do manage to top last year, which is far from certain.


At first glance, outlays were down huge from $359B to $290B. It turns out that we have two timing events doubled up that account for the dip. First up, ~$45B of cost due this October 1, actually went out at the end of September due to the weekend timing, leaving this October’s number artificially low. Second, last October was artificially high due to the same reason, payments due November 1 were paid at the end of October, boosting last Octobers  spend. At the end of the day, these timing issues net out, so a few days into November we are right back where we started, running about 3% over last year.


At $526B, we are running nearly $100B over last year and headed to end the year over $600B, ending 6 straight years of deficit improvement dating back to 2010.


It is encouraging to see withheld taxes at +3.9% for the year, indicating that the employment gains we are seeing are translating into increased tax revenue. Offsetting that is taxes not withheld(-6%), corporate taxes(-12%), along with increased tax refunds, which I count as negative revenue. One can hope that next year payroll taxes continue to increase at this solid rate, and the other tax categories stabilize or even improve, leaving us in the +3% ballpark. In the meantime, it’s bad and getting worse, but not particularly quickly. As far as I can tell, neither Clinton or Trump has a legitimate plan to fix this problem, leading me to believe we could be back in the $1T per year ballpark much quicker than the current trend line indicates. Stay tuned… between the election, year end, tax season, and a March 2017 debt limit, tis the most interesting time of the year!!