December 2015 Cash Deficit

The US Daily Cash Deficit for December 2015 was $3B bringing the 2015 full year deficit to $539B.

2015-12-31 USDD_B

Revenue:

Revenue was an interesting story this month ending up at a solid but unremarkable 3.6% gain. However, Looking at the details, we had withheld taxes at +2.9%, corporate taxes down 9.4%, “other” reciepts down 36.4%, and GSE dividends down 68%, all offset by our good buddies at the Federal Reserve, whose earnings went up from $9.3B last year to $29.3B this year.  Historically, the Federal Reserve makes a cash payment to treasury every Wednesday in the ballpark of $1.5B-$2.0B. Months that have 4 Wednesdays will typically have $7B-$8B of revenues from the Federal Reserve, months with 5 will be closer to $9B. So I was a bit surprised Monday 12/28/2015, when I saw a $19B payment from the Federal Reserve spiking revenue. The recently released Monthly Budget review provides some insight. Apparently the FAST  Act(Fixing Americas Surface Transportation) signed into law in early December has a few revenue provisions including selling oil from the strategic petroleum reserve, and it sounds like forcing the Federal Reserve to pay fewer dividends to it’s member banks and therefore submit more of their surplus to Treasury. I can’t argue with that, though I’m not yet sure what magnitude of increase we can expect going forward.  An extra $20B per month would be $240B annually, which would be a nearly 7% baseline increase for 2016 vs 2015…all else equal. That sounds way too high though, my guess would be that this December $20 payment was a one time catch up or something… we’ll find out over the coming months.

Moving on, without the extra $20B from the Federal Reserve, revenues would have been down, despite having an extra business day, which is never a good sign. October was also negative, so if we see another negative in January it will probably be time to start getting a bit concerned.  For the full year, 2015 Revenues landed at  $3.497 Trillion, up $195B and 5.9%. Not too shabby, even though nearly all of the gains were in the first 4 months, followed by 8 months of mediocrity.

Outlays:

Outlays were up $31B and 9%, primarily on a timing event I missed in my forecasting that pulled $23.4B of SS payments due 1/3/2016 to 12/31/2015 due to the weekend. For the full year, outlays were up $126B and 3.2% vs. 2014. If we back out the timing event, we get a 2.6% YOY gain.

Deficit:

For the full year, we had a $68B improvement in the cash deficit pulling it down from $607B in 2014 to $539B to close out 2015. This marks the sixth year in a row of continuous improvement over 2009’s disastrous $1.611T cash deficit.

Summary:

The top line of a $3B deficit wasn’t terrible, but the key takeaway from December is that revenues look to be in trouble. January will give us a better idea if this is the case, and we should know for sure by the end of tax season in April. For now, I’m going to guess that for 2016, revenues and outlays will both be up ~3%, and the cash deficit will stay in the ballpark of $500B.

November 2015 Cash Deficit

The US Cash Deficit for November 2015 ended up at $93B for the month on $221B of revenues and $314B of outlays. This, plus a ~+20B adjustment of YTD deficit due to true up the end of “Extraordinary Measures” (EM) brings the 2015 deficit  to $535B through 11 months. This adjustment is due to the fact that during “EM” I am unable to back into amortized interest until Treasury uncooks their books….in this case for 7 months at ~$3B per month.

2015-11-30 USDD

Revenue:

Cash revenue was up $11B, or 5%…not bad, but about what we would expect from an extra business day. Federal tax deposits were up 8.2%…which is a solid number….included in that corporate taxes were up nearly 14%. This is consistent with a base line of ~5% and an extra business day. For the year, revenues are up 6.1%…down a little from last month’s 6.3% rate. All together, a solid revenue month, but not solid enough for me to shake a suspicion that baseline revenue growth is slipping below our 5% target which is what we need to offset the growth in outlays and keep the deficit flat around the ~$500B per year mark.

Outlays:

Cash Outlays were up big at first glance….$+30B and 10%. However, the extra business day and timing of interest explains most of that, with our expected increases in SS, Medicare, and Medicaid being offset to some degree by decreases in “Other”….whatever that is. All in, we are still around +3% on outlays for the year…with only one month to go I wouldn’t expect much movement from here even if there are some December surprises.

Deficit:

The November deficit at $93B topped last year by $18B as an increase in revenue was not enough to offset timing of interest payments and an additional business day. For the year, we are now sitting at $535B vs $621B last November and poised to end up under $500B for the year once December’s likely $50B surplus flushes through.

Default Day:

As expected….there was no default… the debt limit was suspended in early November ending 7 months of EM, and pushing the next showdown out to March 15, 2017….likely followed by another 7+ months of “EM” shenanigans.

Summary:

Another okay, but not great month. The first 4 months of 2015 started out with a YOY revenue growth of a little over 10%. Since then, the rate is 3.9%, barely enough to keep the deficit constant with outlays growing at 3%. I’ve been wrong on this before, but it is looking more likely that the 2016 deficit will surpass 2015 ending 6 straight years of improvement. As always…stay tuned!!

October 2015 Cash Deficit

The US Cash Deficit for October 2015 ended up at $119B on $236B of net cash revenues and $355B of cash outlays topping last October’s deficit by $9B

2015-10-31 USDD

Revenue:

Cash revenue was down $10B…the first YOY miss since January when early refunds drug down net receipts under the prior year. There are two primary factors here…first was last October Justice pulled in $9.3B of cash compared to $0.7B this October. The names elude me but I believe this was some big banking fines made their way into the federal coffers. The second factor was that there was one fewer business day vs October 2015, which all else equal would generally be a ~$10B reduction. Still…even with one fewer business day, general tax receipts manages to pull more or less even with last year, which is hopefully a good sign that November…which gets the benefit of an extra business day vs 2014, may be able to exceed our +5% target. Overall, while I hate to see a YOY miss, the fundamentals still point to a baseline of +5% revenue growth. While this is far less than we have seen over the past few years, it is more or less enough to stabilize the deficit between $400-500B and keep at bay the outlay growth of ~3%. For the Year through 10 months, 2015 revenue stands at +6.3%…losing a full % in the last month alone.

Outlays:

At first glance Outlays were flat, but once you add back in another business day and ~$6B of interest payments that slipped to November, we are a little bit above that 3% baseline discussed above. Medicare and Medicaid continue their march upward at +10%. SS is steady at +5%….it will be interesting to see what next year’s comps look like with no COLA increase this year. If nothing else it should give us a good idea what the underlying growth looks like, though I don’t expect too many seniors excited about the experiment. For the year, cash outlays are up right at +3%.

Deficit:

At $119B, the deficit increased $9B over last Octovers $110B deficit on flat outlays and lower revenue. For the year, the deficit sits at $422B, a $76B YOY improvement over 2014. I am expecting another moderate deficit in November, let’s just call it $75B, followed by a $50B surplus in December which would land the full year at just under $450B.

Default Day:

As expected, Default day was averted by a ~2 year deal signed by President Obama just a few hours ago. Details are sparse, but I would assume another debt limit suspension. Supposedly there is an additional $80B of spending…I assume per year split between the military and social programs. In the big scheme of things, $7B a month is pretty much a rounding error, but at 2%….added to our baseline of +3%, we are getting pretty close to that tipping point where deficits could start rising again after 6 years of improvement unless revenue can keep pace. For me, the ending of Extrordinary Measures(EM) is a great thing because EM essentially clouds the cash deficit picture by pretending that debt just disappears. It hasn’t happened yet, but probably in the next day or two, they will bring all that debt back onto the balance sheet and we will get to see how much the debt increases. Last time around, we saw an increase in debt outstanding of $328B. I’m really not sure what to expect this time around. I thought EM would last until February, not November, so I would tend to guess a little lower this time, but it could be just a different mix between public debt and intragovernmental holdings that threw off my math. In any case…once we get the numbers, I will have to go back and restate the cash deficit going back to March when this silly game started. I don’t expect a material diversion, but I won’t know for sure until I get it all reconciled.

Summary:

The top line was bad, but overall the month was not as terrible as first glance. If we start stringing together a few YOY negative revenue numbers I’d start to worry, but for now this just looks like an anomaly….I hope 🙂 For now, the deficit appears to be stabilizing with growth in revenues and outlays more or less cancelling each other out. Clearly that’s not a good thing, but we’ve definitely seen worse.

US Daily Cash Surplus 10/26/2015

The US Daily Cash Surplus for Monday 10/26/2015 was $6.5B bringing the October deficit to $47B with 4 business days remaining.

2015-10-26_B USDD

This is my first update of the month so lets start at the top. Revenue is down $11B making it unlikely we are going to make it to our +5% target this month. Two things stick out…first, since I adjust the timing for days of the week, October 2014 has an extra business day…an advantage that will stick for the rest of the month. Second, last year there was $7B of cash inflows related to the Justice department…. bank fines if memory serves. In any case, these will not repeat, leaving a $7B disadvantage for 2015. If you pull those items out, October would probably look ok on revenues, but certainly not great.

Outlays are also down….This is due to the one less business day mentioned above, and also timing of the final Social Security payment of the month which goes out Wednesday 10/28 this year, but 10/22 last year. Once you add that back in, and factor in that Payments due Sunday 11/1 will instead get pulled into October this year and go out 10/30…October 2015 outlays are going to be up quite a bit (offset in November of course going the other way).

I didn’t make an official deficit forecast for October, but I did mention $75B in the September write up. I didn’t take timing into consideration in that, so I would add about $35B to that and call it at around $110B. That seems fairly reasonable

Debt Limit:

It is in the news now that a deal is in the works to raise the debt limit before Lew says we will hit it next week. I have been predicting early February for ~6 months or so, leading me to believe either I overestimated the depth of the “Extraordinary Measures (EM)” well, or perhaps more likely….they could always call it more or less whenever they wanted to…and a November battle is politically better for them than a February battle in the middle of tax refunds and presidential primaries. In any case…I think this is great news because trying to account for Extrordinary measures is a pain in the a@% for me….getting back to regular ol’ shady government accounting without any advanced countermeasures will make my analysis much simpler.

As it stands, the cash balance is $54B, and we are likely to run a ~60B deficit over the last 4 days of October, so if EM really is about tapped out, I suppose next week really could be Default day…stay tuned we’ll know in about a week.

September 2015 Cash Deficit

The US Daily Cash Surplus for Wednesday September 30 was $20.6B bringing the September full month surplus to $65B, a $2B improvement over 2014’s$63B surplus.

2015-09-30USDD

Revenue:

Revenues were surprisingly strong…despite being flat up through 9/29…a surge of excise taxes and perhaps most surprisingly $8.3B of GSE dividends. GSE dividends of course represent the “Profits” from Fannie/Freddie that get handed over quarterly. Recall they peaked at $66B in June of 2013 and have been steadily declining coming in under $3B in the last 2 quarters. I don’t know the full story there, but cash is cash and we’ll take it. This helped push the YOY revenue gain to +5.5% for the month…certainly respectable. Through 9 months, 2015 is at +7.3% over 2014 and trending down.

Outlays:

Outlays, on the other hand were up $18B…good for a a 5.6% YOY gain. No one category jumps out, but the extra business day probably explains most of it. 2015 through 9 months is sitting at +3.3%

Deficit Surplus:

As has become somewhat typical for a quarter end month, we booked a $65B surplus just topping September 2014’s $63B surplus. The full year deficit stands at $303B through 9 months, an $85B improvement over 2014. Of course the government’s fiscal year which runs from October-September concluded 9/30… I’ve long since given up comparing their deficit numbers to my cash based numbers, but they will report the annual deficit in a few weeks. If it were me..I would put the FY2015 deficit at $472B vs FY2014 at 564…good for a $92B improvement.

Default-Day:

As we all know, the debt limit was hit back in March at $18.113T. Since then, Treasury has managed to keep the government going by drawing down the sizable cash stockpile (274B after the April tax haul) and by implementing  “Extraordinary Measures” (EM) which allows them to essentially pretend some types of debt do not exist….thus pulling it off the balance sheet and issuing new debt in it’s place. When EM available and the cash balance are drawn down to zero, the government will no longer be able to make daily payments above and beyond its daily revenues. We end September with a $199B cash balance.  I have been predicting that D-Day will occur in Early February-2016 for quite a while now, so I was a bit surprised when I read Treasury Secretary Lew is now saying that date is November 5. I have a hard time squaring a default day one month out with a $199B cash balance. Assuming EM is completely played out (I doubt it)…I have the cash deficit for October preliminary pegged at $75B. November I have the full month at ~$115B. So if these are in the ballpark….getting all the way through November should be possible. I have December at a $50B surplus, though odds are an early month deficit will be offset by strong revenues in the second half of the month. So 12/5 I could understand but 11/5 seems bogus to me.

What makes more sense is that the White House has simply decided that a November battle is more favorable to them than a February battle and adjusted D-day accordingly. A pre-holiday season battle is going to be a lot easier to win than a battle right in the middle of the presidential primary season and more importantly…tax refund season. Shady??? Yes…but no more shady than the whole premise of Extraordinary Measures in the first place. At the end of the day, the debt limit will be raised….let’s just get it over with and quit with the accounting games….if nothing else, it will make my job a whole lot easier 🙂

Summary:

I was pleasantly surprised by the month…going into the very last day I was expecting to report revenues at +1/2% and outlays at +5/6%. till, while a surprise increase in GSE dividends saved September from being a disaster, for five months now, we appear to just be doing just a little better than treading water with revenues at +5% and outlays at +3%. Over the next few months it is likely the Q3 stock market weakness will put some downward pressure on revenues, and it could get interesting fast.