US February 2013 Cash Deficit Review: Part 1

Another month has come and gone. We are all now 28 days closer to death….whenever that will be. We are 28 days closer to the day our star, the sun, runs out of hydrogen, begins it’s transition to a red giant, and ultimately cooks the earth into crunchy black char ball before destroying it altogether. And… perhaps even more ominously… we are 28 days closer to the day the US government begins defaulting on its on and off balance sheet liabilities. For all of these certain future events, we can’t predict  the exact date they will occur….but we do know with absolute precision that we are one month closer to the day of reckoning than we were a month ago.
But enough gloom and doom, let’s crunch the numbers and see what happened in February and what it means for the big picture. As we have discussed in prior posts, February is almost always the worst month of the year for deficits, even back in the good ol’ days like 2000 when we kinda sorta actually had an annual surplus…depending on what kind of accounting you used (shady vs. shadier??) So we came in at $229B…a bit under last year, but right in line with the last 5 years. Clearly what little improvement we have is immaterial…a mere 8% improvement, and there is a good chance most of that is related to delayed tax refunds.
022013 Deficit vs py
The biggest deficit related news in the last few months may have been the President’s tax hikes…namely about $60B per year on the wealthy…and about $120B per year on those of us who pay payroll tax. So let’s take a look at revenues by category with this screenshot from excel. You may recall that 2/2013 revenue was $95B vs. $80B last year. I need to clarify that this is “net” revenues….We take all revenues from the sources listed below, then subtract tax refunds to get net revenues. Since February is especially heavy in refunds, the net is always much lower than other months, but we apply it consistently, and I am much more comfortable with this accounting approach.

022013 Revenues by Source

 In yellow I have highlighted some of the more interesting sources of revenue. Federal reserve earnings are down almost $3B…this is a bit odd and I will definitely be keeping an eye on this. Federal reserve “earnings” primarily consist of them printing money, and using it to lend money to the federal government by purchasing bonds. Then, the treasury sends the Federal reserve interest payments…and the federal reserve turns around and sends that…less their costs…back to the treasury? Sounds kind of shady huh? You bet your a** it is. Moving on “FTD’s” (’s not what you are thinking)…Federal Tax Deposits is the governments primary revenue stream….made up mostly of  taxes (income and payroll) withheld from your paycheck and sent in to Uncle Sam. They are up, but only $7.5B…we’re expecting ~$15B per year thanks to the recent tax hikes. It could just be the extra day in February 2012, but I’m not entirely convinced this is the case.
Next we see that “Other” deposits….are down $7B, but that deposits from TARP are up almost 500%. You may recall Tarp from years ago…where our government lent hundreds of billions of dollars of public money to all their donors, buddies ect… at below market rates. As those loans are repaid…and a good chunk of them were…the money comes back in as revenue. It’s not perfect, but as an Uncertified Public Accountant, it still gets my stamp of approval. For more information on this, take a look at “We Won’t Miss TARP, But Uncle Sam Will”. Finally, we get to the big number…Individual Tax refunds were down year over year by $15B, presumably because of the tax filing being pushed back a week or two and subsequent processing delays. If we back this out, then what we have for the month is a small increase in FTD’s offset by small decreases elsewhere for flat YOY revenue…despite tax increases….that’s not a good sign, but one month does not make a trend…lets see how March turns out before we turn on the recession alarms..ok maybe April.
Ok guys…this is getting long, so i’m going to split it in half and do the spending and debt analysis tomorrow. If you were wondering about the 3/1 daily deficit…it was a whopping $53.5B….I’m going to hold off a day or two for the charts because the timing is making the year on year charts go nuts so it doesn’t really make sense yet.