December 2017 US Cash Deficit $10B, 2017 Cash Deficit $710B

Nothing really interesting about December’s $10B deficit, but we now have a total for 2017 which rang up at $710B, $13B higher than 2016’s $697B deficit. This is the highest annual deficit since 2012 topping 2013’s deficit by just $1B and is the second year in a row of increases.

Digging in a bit, revenues were up a solid 3.1% while outlays were up 2.9%, more or less cancelling each other out, leaving us with just a 2% increase in the deficit.  Looking at the Wayback machine, it looks like last January I eyeballed 2017 with a 4% increase in outlays and a 2% increase in revenues, which penciled out to an $800B deficit. Not a great estimate, but good enough I suppose. It’s hard to be happy about a $710B/Y deficit, but looking forward, it’s hard to imagine it gets any better from here.

2018 Forecast

We don’t want to think too hard about it, so on the outlays side, I’ll go back to the +4% growth, which is $170B for the year or $14B/month. Now the biggy…tax cuts. While they go into effect January 1, it’s not quite that simple…2017 taxes will still be flowing in through April 15th, and the withholding tables are unlikely to be updated before February, so calendar 2018 won’t quite get a full year of tax cuts showing up in the cash receipts. I’ve seen quite a few estimates all over the place, so lacking any data to do real analysis…I’ll just pick a nice round, and conservative number, and say cash receipts in 2018 will decrease by $100B, pulling revenue down from $3.55T in 2017 to $3.45T in 2018. Following the logic, this will be weighted in the second half of the year, and overall pencils out to about a 3% YOY decrease.

So…quick math…+170B outlays and -100B revenues puts the 2018 cash deficit at around $980B, $270B higher than 2017 and right back to knocking on $1T. Yikes!!that didn’t take long…maybe we should be happy it took them a year? Nah…I mean once you have $20T of debt, do another few hundred billion really even matter? I doubt it.

Default Near?

When will the US default and how?  The truth is that this can continue as long as Treasury can continue to issue a trillion dollars of new debt annually at ~2% rates to new fools, the Fed, algos etc… Don’t get me wrong…this debt can never be repaid…it will either be inflated away or officially defaulted on. Maybe that’s what the stock and housing markets are telling us….maybe they aren’t at high’s…the USD is just worth that much less and people are hedging against it’s decline by bidding up the price of tangible assets and companies that own them. Just a thought that’s been rolling around in the back of my head for a whle. Whenever it happens…I for one will not feel sorry for the blind fools who even for a second believed US debt was risk free.

Temporary Debt Limit Deal Reached (9-2017)

As mentioned in the last post, a deal to increase the debt limit (technically suspend until December 8) was reached…supposedly between Trump and the Democrats, but that story seems a little silly to me, not that it matters.

So, last Friday, Treasury pulled all of the “Extraordinary Measures” (EM) IOU’s out of the coffee can and made them official, pushing the total debt outstanding up by $317B. Again, nothing shocking at all.

As I have complained mightily about in the past, these shenanigans nuke my simple cash deficit calculations, but I am able estimate them. Now that EM is over and the debt is once again properly accounted for, and I can now calculate it to the penny again. Over nearly six months of EM, my estimates were only off by $5.5B….or $1B per month, which was better than previous EM periods, though honestly nothing about my process has changed. What that means is that just last week I had the August YTD deficit at $460B….these revisions push it up to $465B….so no real material change….The 2017 deficit is pretty much in line with the 2016 deficit which was $476B through 8 months.

My thoughts on the debt limit….it is still just a really bad joke. I get the principle….but am still forced to see that it has failed completely so many times for so many years. And then of course…can we really even call it a debt limit if Treasury can then circumvent it using laws/rules passed by congress for six full months, and $317B? I’m in favor of scrapping the whole silly thing, but perhaps we should at least stop calling it a “debt limit”….maybe we should call it a “Red Line”…LOL (too soon??).

Here is the deal…the US government has a baseline deficit at the moment of about $600-$700B….same as last year. As it stands, this budget is “un-balancable” (probably a made up word 🙂 ), and therefore the debt is unpayable. Sure, we can roll it for a while, maybe a long while, but we can never pay it off.

In order to change the baseline above…. something drastic must change, probably on the spending side of the deficit equation. Nearly half of the annual spending can be attributed to just 3 things…Social Security, Medicare, and Medicaid at nearly $2T/Y. You simply can’t plug that $700B hole, or even make a dent in it with out materially changing these programs, and yet, not a peep. That’s why it pisses me off to hear the Republicans in particular pretend like they care about this issue….then come up with some crazy optimistic proposals about how they are going to “save” $500B….over 10 years. That’s not even worth talking about….if you care about the debt/deficit…come up with a plan to save $10T over 10 years…or don’t even bother trying.


One final thought….now that the EM cannon has been reloaded with a fresh ~$350B, don’t be surprised if the debt limit has in actuality been pushed out not just a few months, but possibly all the way out to next summer. The timing isn’t as good for Treasury this time around….last year EM went into effect just after the heavy tax refunds had gone out in February and just before the heavy tax payments of April. This probably would have got them well into October if the hurricanes Harvey/Irma hadn’t given them the cover they needed to extend it sooner. This time around, it will be much tighter. They may not make it through tax refund season without running out of cash, but if they somehow can make it to April when cash starts flowing back in they can probably make it through the summer again…I hope it doesn’t…watching this stupid game year after year is kind of a downer!!

Here We Go Again (Debt Limit 2017)

Will we never learn? Without a lot of fanfare, the debt limit was reinstated on 3/15/2017 at $19.809T and Treasury instituted the infamous “Extraordinary Measures” (EM) to circumvent the law and give our politicians more time to make fools of themselves.

Extraordinary Measures??

First off…what are Extraordinary Measures?  For me, they are a huge pain in the rear. You see, calculating the “cash” deficit is actually a very simple exercise…we look at the change in cash balance, and adjust it for the change in debt…and voila!! So for example on 3/3/2017 the cash balance dropped by $22.080B and the debt decreased by $235M. Add them together and we get a daily cash deficit of $21.845B. Of course you can add up all of the revenue line items and subtract out the outlays….and come up with the exact same answer. Of course…I actually do that as well, but you don’t need all of that complexity to calculate the cash deficit. In any case, EM nukes my process, and while I can back into a decent educated guess, unfortunately I won’t have an actual number until these shenanigans are over. The margin of error is ~$5B a month, which actually isn’t bad, but still enough to drive the accountant in me a little nuts.

The mechanism for EM is actually quite simple…they take some parts of the debt…I can’t remember specifically off of the top of my head but things like federal retirement funds…and simply pretend thy don’t exist(a little at a time). This simple move lowers the official debt outstanding, allowing them to continue to issue new debt. When the debt limit is ultimately increased, they just pull all of the EM debt they were pretending didn’t exist back onto the balance sheet resulting in a huge one day increase. Last time we played this game back in late 2015 the result was a $339B increase, so it seems reasonable to think they can squeeze about $350B of EM this time.

How Long Do We Have?

Last time around the timing of the debt limit was the same if I recall…debt limit reinstated 3/15/2015, and EM used to get us all the way to the resolution in early November…so over 7 months. As I stated back then…the middle of March is just about the best possible time for a debt limit standoff because the huge outflows of tax refunds are pretty much behind you, and you are just a month removed from a huge inflows in April which as of late have been running in the ballpark of a $200B surplus. With an April surplus and $350B of EM…and getting to October/November again seems like a pretty solid bet.

Cheney was right…Deficits Don’t Matter(Anymore)

Here is what I know…the US debt/deficit is a massive problem. It will blow up, and there will be a lot of pain….maybe worse. This will happen…I am 100% certain of it. The window to fix it has now closed….I’m not sure it was ever really open. Could be this year…could be 20 years from now…but it will happen.  But since it’s going to happen, I’ve stopped worrying about it. Why should republicans who don’t care about the deficit and democrats who don’t care about the deficit fight over some measily $15B here or there…when obviously the American people don’t care about the deficit either? Just hours ago….the republicans plan the shoot down the much hated and relatively new entitlement(ACA…AKA Obamacare) went down in flames despite Republicans having the presidency and majorities in congress. This is the system that is going to fix $20T in debt…growing at ~1T per year indefinitely? Hah!!

My thoughts on the matter have changed a lot over the last few years as I have accepted this reality. Rather than worrying about it…we should just enjoy it as long as we can. As long as there are still suckers around willing to buy “risk free” US debt…let them!!  So this is my advice to Trump and the Republicans….stop pretending to care about the debt…we don’t believe you…you aren’t impressing anyone, and honestly nobody even cares anymore.  So forget about it and go big on things people do care about. Tax cuts, jobs, infrastructure,trade, immigration….heck maybe break up the medical industry that seems more interested in financially screwing us over every time we walk into an office or hospital than actually improving health.

So pass the silly debt limit increase or better yet just get rid of it….then get to work!!


Lew Building Massive Cash Hoard For Next President-Costs Taxpayers $8B Per Year

I’ve been watching this develop for a while for a while…Here’s the deal…As of last Friday, Treasury had built up a cash balance of $428B. Now, that might not sound like a lot……Hah!!…just kidding… It’s huge and enormous and completely unnecessary. To put it in perspective, Treasury could stop borrowing today, and not borrow another penny for the next 8-10 months.

Here is the historical chart:

uscashbalance For the 10 years heading up to the “Great Recession” Treasury maintained an average balance of about $36B. They used this balance, and daily cash inflows to pay for daily expenditures and issued new debt as necessary to fund the deficit. Then, in the second half of 2008, borrowing soared, ending 10/2008 with over $600B cash in the bank as they prepared to…well, we all know what they did with the cash…no need to bring that up again here 🙂 Balances were kept high for a few years before leveling off at about 100B, but have been headed back up lately.

So…who cares you may wonder? Well, think of it as a this way. Our good stewards at treasury could take say $400B of “excess” cash, and pay down the debt by that much, assuming an average rate of 2%, and save a cool $8B a year…just by not having a really stupid cash management policy. I know…I know…chump change right?

Debt Limit Avoidance?

This is the most likely answer. After the last debt limit battle ended last November, the debt limit was suspended until 3/15/2017…meaning that they could issue as much debt as they wanted in the meantime. Now I haven’t waded through the specifics of the law, but my thought all along has been…ok…If I were in charge, and I didn’t want to deal with that nonsense again, on 3/14/2017, I would just issue maybe $3-$4T of debt, park the cash in my Federal Reserve bank account, and use that to squeak by the next 4 years.  Clearly they don’t think they can pull that off without consequences, but they do seem intent to make sure the next president (I am guessing they are pulling for Clinton) hits the ground running. Back of the envelope, if we hit the debt limit 3/15/2017 with $400B of cash in the bank, the government will likely be able to go a full year without raising the debt limit just by burning down the cash balance and re-deploying “Extraordinary Measures”

I’ll just leave it at that for now….I’ll leave the conspiracy theories to the experts!!


US Daily Cash Deficit 1/24/2014

The US Daily Cash Deficit for Friday 1/24/2014 was $0.6B bringing the January 2014 cash surplus to $9B with one week to go.

2014-01-24 USDD

Revenue takes a small $1B step back…outlays are flat. No news really…but never fear….we are just a few weeks away from another debt limit showdown.

While we are currently without a debt limit, wherever the debt lands at 2/7 will become the new debt limit….at which point Treasury will enact “extraordinary measures (EM)”….essentially pretending some of the debt does not exist by hiding the IOU post it’s in the basement. However….Right about 2/8…tax refund requests are going to start flooding in….leading to a ~$200B or so February deficit….and limiting the longevity of EM to just a few weeks according to Treasury….compared to about 5 months last time around.

I can’t see this getting drawn out that long…but just in case…I think I’ll be filing my taxes extra early this year.