The US Daily Surplus for 1/15/2013 was $4.5B bringing the deficit through 15 days to $36B. Timing differences are still apparent in the data. Not only is 2013 1 business day ahead of 2012, but MLK holiday timing is throwing off the timing as well. I expect these timing issues to mostly resolve themself by next Tuesday, so by next Wednesday we should have a general idea of how January is going down.
The DTS for 1/15 has some oddities that I don’t quite understand at the moment, though I don’t think it affects my deficit numbers. I’m almost certain it us due to “extrordinary measures”, but I can’t quite wrap my mind around the accounting… Note to self…. never get into government accounting!! The gist of what they have done is somehow redeemed about $27B of Intragovernmental Debt …our pretend debt to ourselves and ended up with $27B in cash….while still staying under the debt limit. I sent an email to their usually very helpful staff…hopefully that yields some clarity. If not, i guess we’ll just have to take their word for it. In any case, this neat little switcharoo has pushed the cash balance, and debt limit cushion up to $77B over yesterday’s $50B. When coupled with the delay in tax refunds, this pushes the needle for impending default per my simple linear model to about 2/10 to 2/14. Remember that 2/15 there is a large interest payment due…~$35B from memory. If Bernanke can conjur up $27B in cash at will on a random Tuesday, it’s a pretty safe bet he can make that payment.
As a side note…regarding the debt limit, there has been a lot of talk about prioritizing payments, and all of the difficulty that would bring. I’m not reccomending this, and I fully expect a debt limit increase before we get there, but the answer is obvious…just delay tax refunds and prioritize all other spending above them until the debt ceiling is raised. Don’t get me wrong, delaying any payments is going to hurt the economy and piss people off, but delaying tax refunds seems a little bit less disruptive than not paying soldiers, social security, doctors ect… If Obama can frame the headlines that way…and blame Republicans for blocking tax refunds, I just don’t see the republicans having the spine to continue fighting. Or…it would just cause riots in the streets, but I guess that’s one of the risks of playing with fire like this. Without further ado…today’s charts.
Well, it’s official. the IRS has delayed the opening of tax season by 8 days from 1/22 to 1/30 due to the late fiscal cliff deal. I don’t know about broader economic effects from the 8 day delay, but if nothing else, this will likely give us a one week delay in the debt limit saga. Now…for the record…February is just about the worst month you could pick to have a debt limit fight…or best I suppose depending on which side you are on, since tax refunds make it the absolute worst month of the year.
For a few weeks now, my needle on the “Debt Limit Cushion” has barely budged…pointing to 2/1 as the imminent default date…maybe a few days later. Treasury, on the other hand came out and said 2/15. Last year, between 2/2 and 2/15, the government ran a $141B deficit…I just couldn’t understand how we were that far off….but they likely knew about the delay far in advance…heck maybe they even encouraged the delay for extra time. In any case, I can buy 2/15 now…+/- 3 days.
From a monthly deficit perspective, I’m not quite sure how to model this. After all, I almost never have the tax documents I need to file until early Feb. anyway. So if I file the same time I always do, will processing time be the same? Is there excess capacity to process claims, or is there a queue…and I will be pushed back 8 days due to the delay? Since 99% of everything is automated, I wouldn’t really expect a full 8 day delay, but this is our government, so why wouldn’t it be?
The January effect is a bit more certain. Those early filers received about $7B of refunds in late Jan-2012….we can probably expect most of that to get pushed into Feb., lets just say $5B. Not much in the big picture.
February could go either way. In 2012, $129B of refunds went out in Feb., $60B in the last 8 days. If there is a linear delay….expect a material change in February. If the delay is not linear, and the IRS has the capacity to process most of the delayed returns in early Feb, there could be little to no change. All that is left to do now is sit back and watch….and of course hope Treasury even has the cash to pay us: Increase Debt Limit or Tax Refunds Will Not Go Out