Daily Treasury Statement

The US Daily Cash Deficit for 12/19/2013 was $4.7B bringing the December 2013 surplus through 19 days to $17B.

The main story continues to be that revenues look low….here in 2013, we have come to expect revenue gains of 10%+ each month…yet here we are with only 7 business days left sitting at -2% vs 2012. What I suspect is happening is a preview of what we may see all of next year…You see, looking back a year, everybody was running around worried about the fiscal cliff…a part of which was taxes being raised effective 1/1/2013. So of course…tax accountants were working into the wee hours of the night in excel trying to figure out the optimum year end tax moves. For many…generally corporations (remember those “special” dividends) and the wealthy…it made a lot of sense to take gains in 2012…and therefore paying taxes in either late 2012 or early 2013. This created a “surge” in revenues that started in 12/2012.

Now…that’s a good thing…but the problem is…it’s one thing to post +10% YOY gains once due to a one time event or change in tax rates ect….you get that one time boost to a higher steady state. But then…12 months later…it becomes very difficult to get another 10% gain on top of the first 10%. It’s kind of like getting a promotion in corporate America….you get that nice one time boost…but come Jan 1, you’re back to that same o’l 1% raise everybody else gets. This is more or less what I am expecting for 2014…somewhere around 4-6% growth, though it wouldn’t surprise me if it comes in lower.

Back to December…every day that passes without closing the gap makes it less likely that it will happen. I still expect revenues to end up YOY positive, we do have an extra day after all, but the window for a late month surge is shrinking….

The US Daily Cash Deficit for Tuesday 12/10/2013 was $5.2B pushing the December 2013 cash deficit through 10 days to $34B.

Revenue lost $1B of ground, but so did outlays, so we are still pretty much even compared to 2012. It is curious that 10 days into December….in a year with surging revenues…we are still down a bit when we would typically be expecting 10% revenue growth…If we are still flat after next week….it would definitely be time to get concerned. For now though…it’s just interesting. A strong revenue push over the next week could make this weak start a distant memory…

So…looking at the full year…344 days into 2013 by my count…Revenues are up 13.82% at +$348B. Looking at this data set which goes back to 2006, the only year that comes close to this level of revenue growth is 2011 at 9.46%, with everything else under 5% down to -9.7% in 2009.

Compare that to outlays, which are down $53B…or -1.45%….an actual small reduction, but we’ll take it.

Looking forward (2014+), we can probably count on outlays continuing to grow at low single digit rates…say 1-3%, with a pretty high confidence level (absent a recession and “stimulus ect…). Revenues, on the other hand, are the wildcard and are the critical variable. If they continue to grow at 10%+…mathematically we would be in pretty damn good shape by the end of the decade. That kind of growth is possible in spurts, but stringing  more than a few together is highly unlikely. However…even something lower….like 5-6% YOY growth  would be a huge help…delaying the inevitable perhaps out to the end of the decade….maybe. If, however…we can only manage low single digit growth in federal revenues…the situation starts to deteriorate fast…we could get back to the $1T annual deficit level again by 2018 and never look back. If we actually got another recession somewhere in the mix that drove revenues down and spiked outlays….it could get real ugly(er??) in a heartbeat.