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.

US Daily Cash Deficit 9/23/2015

The US Daily Cash Deficit for Wednesday 9/23/2015 was $5.6B bringing the September 2015 Surplus through 23 days to $45B.

2015-09-23 USDD

Revenues are flat with only 5 business days remaining. However, the beginning of the month timing in 2015 pushed some revenue into August vs. the timing last year, which contributed to August’s +8.4% and got September off to a really slow start. 2015 is also down a business day compared to 2014….when we get it back next Wednesday it should give us a solid $10B+ bump. That alone isn’t going to get us to +5% but it makes a positive YOY fairly likely. Outlays look to be running a little hotter …already at +4% and the extra business day could easily add $10B+ just like revenues. Put it all together and my initial forecast of a $60B surplus still looks fairly reasonable but maybe a little on the high side.

August 2015 Cash Deficit

The US Daily Cash Deficit for August 2015 was $98B. This brings the 2015 year to date cash deficit to $368B, an $83B improvement over 2014’s $451B deficit through 8 months.

2015-08-31 USDD

Revenue:

Revenues were strong at +8.4%…the first month since April to break 5% breaking a 3 month streak. The year to date revenue gain stands at +7.6% which is a solid number, but it has been dropping fast. It will be interesting to see if September stays strong at +5% or dives back under and continues to pull down the YTD.

Outlays:

Outlays were down for the month due to timing but the YOY remains at +3%. For most of 2010-2014, we saw increases in outlays for Social Security, Medicare, and Medicaid offset by reductions in spending elsewhere….primarily stimulus, and defense keeping overall spending flat. In 2015, it looks like those other categories have flattened out while the big 3 continue to surge. It may not seem huge, but a 3% baseline increase in outlays adds  over $100B a year of spending a year growing exponentially.  Just to keep the deficit flat, a 3% increase in outlays needs a little less than 4% revenue growth to cover. Looking at the last 4 months…we’re at +4.9% including a pretty good August.

Deficit:

Through 8 months the deficit stands at $368B as revenue gains of $160B have been offset by a $79B increase in outlays. If current trends hold and we finish out the year with revenue at +5% and outlays at +3% 2015 will end up at $425-$450B for the full year ve $556B in 2014. Do note that the Feds current use of “Extrordinary Measures (EM)” has forced a methodology change and added an extra margin of error that we won’t be able to reconcile until the debt limit is raised again and EM ceases.

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  “Extrordinary 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. My guess of the amount of total EM available to treasury is $350B, of which they have used about $220B based on some back of the envelope calculations. The balance of $130B plus the current cash balance…$132B at the end of August gives us the cash cushion available to cover future deficits. At the end of August, this amount was ~$262B, down from ~$360B at the end of July. Looking forward using my model, $262B should last until about the middle of February 2016….just as tax refund season begins heating up again. This timeline hasn’t changed much and I don’t really expect it to…we have enough cash to make it to February, but making it through tax refund season is very unlikely, meaning that raising the debt limit will become a very big issue right around the time primaries for the 2016 presidential election are getting started.

September Forecast: 

September is a big revenue month as quarterly tax payments will start to flood in mid month. While August had 229B of cash revenues, look for September to come in just under $400B….so you can see that we have big swings in revenue moth to month. I’m going to forecast the September 2015 cash surplus  at $60B.

US Daily Cash Deficit 8/21/2015

The US Daily Cash Deficit for Friday 8/21/2015 was $0.6B bringing the August deficit through 21 days to $81B.

2015-08-21 USDD

Revenues:….down $1B are mostly flat, but 2015 is currently down a business day which it will get back Monday 8/31, which should be good for ~$10B or so of revenue…pulling us to around +5%….if that’s how it shakes out.

Outlays: Down $38B primarily on month end timing. However, there was an $8B payment that went out 8/19 that appears to be related to the Afordable Care Act “Transitional Reinsurance Program”…google it for a really exciting read:) Now, $8B really isn’t a lot in the big picture…August will almost certainly have over $300B of cash outlays in total. However, it wasn’t in my initial forecast, and it is big enough to add a 2-3% bump in baseline outlay growth….if only for the month.

Year To Date:

Revenues are up 6.9% YOY, but continue to trend downward. Outlays are up 3.2%…. so if revenues are trending down to sub +5%, we could see the deficit bottoming out in 2015 at around $450B.