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Dec 20
0

## We Won’t Miss TARP, But Uncle Sam Will

By copernicus | Debt Limit, Fiscal Cliff

TARP, the unloved program that either saved the economy or bailed out the bankers depending on who you talk too will probably be wound down over the next year. According to the latest report, the remaining balance outstanding is a little less than $50B. You may want to hold off the Champaign though, because when TARP is gone, so are the cash inflows it generates. Over FY 2010-2012, TARP contributed almost $300B in cash inflows to the federal coffers, reducing the cash deficit and the need for borrowing over that time period. To understand how, let’s first imagine TARP as a two year program. In year one, $700B of cash goes out, resulting in a $700B reported deficit. However, while there were certainly losses, TARP wasn’t a complete loss, as a majority of the money was eventually paid back. Back to our example, let’s say in Year 2, $600B was paid back and $100B was written off. Thus in year two, we record a $600B surplus. Clearly this is different than how a public company would account for the transactions…welcome to government accounting. Now obviously TARP was not a two year program, but the implications are similar. Reported deficits primarily incurred in 2009 are now being offset in future years as balances are repaid or sold.

Now at this point you may be thinking, what’s the big deal? So $50-$100B of “revenue” is about to dry up, that’s only around 2% of federal revenues. I bring it up because I just read an article comparing Obama’s tax plan to Boehner’s. According to the Tax Policy center, Obama’s plan would raise taxes on the “rich” by $40-$45B next year, while Boehner’s plan would generate about $20B. So neither comes close to even plugging the hole TARP, an admittedly small revenue source will leave when it is gone next year. The spending side offers little relief either. Next year alone, we can probably expect Medicare and Social Security spending to increase around $100B together, which is around the magnitude of spending cuts being discussed. Using the Daily Treasury Statements as a source, we can see that the trailing twelve month cash deficit as of 11/30/2012 was $1.176T, that’s over one year, not ten. The bottom line is, there is nothing serious about any of the proposals on the table. It is becoming increasingly clear that we as a nation will not voluntarily address this problem. That said, before you bid on that next round of 30 year notes, you might want to ask yourself what the world is going to look like in 30 years when you try to cash it in.

Dec 20
0

## Daily US Deficit For 12/18/2012

By copernicus | Daily Deficit

##### The US Daily Deficit for 12/18/2012 was $4.2B, reversing a 2 day run of $75B in surplus primarily related to corporate income taxes. Through 18 days, December 2012 is looking $47B better than last year, but adjusted for timing, we are really only about $17B better, primarily on strong corporate income tax receipts. Keep an eye on costs…they appear to be creeping up, and could wipe out some of the revenue gains by month end if the trend continues.

Dec 19
0

## Daily US Deficit For 12/17/2012

By copernicus | Daily Deficit

As expected, revenue continues to pour into the federal coffers leading to a $55.6B Surplus for 12/17/2012, bringing December 2012 to a surplus of $31.6B through 17 days. There are still a lot of days left, but with the majority of the corporate taxes in the books, there is a noticable increase in tax revenues over last year. If revenues continue to be strong, and costs stay on trend, we could be very close to a surplus by month end, which would be the first since 2007. I can’t prove this, but It is possible people and companies are making financial moves to pull profits into 2012’s low tax environment and push losses into 2013. Whatever the case, from a daily deficit perspective, the next month or so looks to be fairly smooth waters leading up to February, which will likely be a $200B+ deficit.

Dec 18
0

## Seeking Alpha Links

By copernicus | Debt Limit

##### Below are links to a few articles I wrote and published by the good folks over at SeekingAlpha.com. I should have posted links earlier, but hey, I’m kinda new at this!! A few are reposts wrung through the editing process, but this one is new…I think you will enjoy it:

#### Increase Debt Limit Or Tax Refunds Will Not Go Out

also:

http://seekingalpha.com/article/1059021-the-spending-problem and http://seekingalpha.com/article/1066631-are-intragovernmental-holdings-real-debt

Dec 18
0

## Daily US Deficit For 12/14/2012

By copernicus | Daily Deficit

##### The Daily Surplus for 12/14 was $19.8B, bringing the deficit for the month of December down to $24B through 14 days, an apparent $38B improvement over December 2011 through 14 days.

##### That may sound good, but most of the apparent improvement this month is due to timing. First off, about $30B of payments for 12/1 went out 11/30 because of the weekend, and second, the timing of corporate income taxes, due 12/15, was also thrown off by the weekend, but this should work itself out of the noise in the next day or two.

##### Now let’s take a look at Revenue and Outlays, which of course we subtract to get to the deficit. Revenue for 12/14 was $30.9B, making it the highest revenue haul since 9/17. The key driver in both of these dates, as mentioned above is the quarterly corporate income tax due around the 15th the third month in every quarter. Also adding to revenues was an $8B contribution from TARP, the gift that keeps on giving, at least from a deficit perspective. When analyzing the deficit from a cash perspective, we counted TARP as a deficit when the cash went out the door in 2008/2009. However, that money wasn’t really all lost, as a sizable portion of TARP was, and continues to be paid back. Today’s $8B payment is the first significant payment of this fiscal year. FY 2012 had a total of $66B, so the run rate seems to be slowing exactly as one would expect.

##### Through 14 days, December 2012 revenue is running $14B behind last year, though I suspect this is all timing related to how the weekend fell versus last year. I’ll be more impressed if the number holds through this Friday.

##### Moving on, total outlays for the day were $11B with the only significant outlay being $2.8B for Military Active Duty Pay. This brought the December 2012 total to $143B, $23B under last year, primarily due to timing.

##### All in all, 12/14 was a pretty good day from a deficit perspective. At the end of the day, debt outstanding was reduced $10.B and cash in hand increased $10B, bringing the debt limit cushion(Cash + borrowing ability) to $112B. Look to see another sizable surplus 12/17 and above average revenues for the rest of the week. I will do some more forecasting at the end of the week when we have a more complete data set, but for now, I am still estimating the December 2012 deficit comes in somewhere around $30B.

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