Daily Deficit

The United States Cash Deficit for March 2015 came in at $16B compared to March 2014 which came in at $25B using the same methodology. Do recall I had to adjust the math this month due to “Extraordinary Measures”(EM). This methodology attempts to isolate EM, but also ignores discounts and premiums on newly issued debt. Using our standard methodology, March 2014 had a $31B deficit, so $6B higher. Once EM is over…in 6-12 months (hopefully sooner) , I will be able to true up the true cash deficit over this time period, but for now, this will have to do.

REVENUE:

Revenue started out as the big story of the month as we kicked off March with $35B of additional revenue from the FCC spectrum auction. Sure enough, March 2015 ended up with revenue $38B higher than 2014, but that’s not the whole story. Offsetting this windfall, GSE dividends (Fannie/Freddie) were down big from $17.6B last March to just $2.8B this March. This is the lowest I’ve observed, with December 2011 at $4.3B being the next lowest, and June 2013 the highest at $66.3B…one has to wonder….will this revenue source completely dry up, and maybe even go negative over the next year? Nah…. Other than that, we had bonafide revenue growth where it counts…withheld taxes (up 6.8%) and corporate taxes(up 12.9%) , giving us a solid baseline at ~+8% for the month, though the extra day certainly helped that a bit. For the year, this baseline is a bit under 5%…good, but not as good as years past.

Outlays:

Outlays were up a fairly big amount for the month at +11% and $29B. $6B of that was expected interest timing. The rest can be mainly attributed to our big 3…Medicare, Medicaid, and Social Security, up $14.5B between them, up 12%. The rest was scattered over multiple categories. This puts us at +4.5% for the year, and while granted our methodology is a little different than last month when we were pretty much flat, this is not a good development through 3 full months of 2015.

Deficit:

For the Year, the deficit stands at $263B…$10B under last year. That’s not impressive but it is improvement, so of course we’ll take it.

Refunds:

Refunds are a big part of February and March cash flows, and there was some thought that Obamacare would spoil tax refund season for those who had conveniently underestimated income to recieve bigger subsidies. That may be the case, but 2014/2015 individual refunds are just about tied with last year both YTD and for the month. 2015 YTD is at $198.8B…2014 was at $198.4B. Business tax refunds have nearly doubled from $12B to $21B on the year, but are still way under 2010’s $42B through 3 months.

Forecast:

March was not my best showing…I guess I let my optimism 🙂 get the best of me forecasting a $5B surplus, but marginally lower revenues and higher outlays sunk me, leaving me with a $21B miss to follow February’s $1B miss. Oh well…my average is still around $10B. Moving forward, April is notoriously unpredictable. Last April, I missed by $55B….optimistically predicting a $180B surplus vs. an actual surplus of $125B. So…fully aware this may be a swing and a miss, I’m going to assume we get ~8% revenue growth in both withheld and not withheld taxes, while outlays are up ~3% overall. Pencil that out, and I’m down for a $155B surplus for the month of April.

Summary:

It was another good month, even if most of that was due to the spectrum auction. I know everyone is talking about popping bubbles and doom and gloom, but for the time being, government revenues continue to grow at a fairly steady pace. Granted, things can change quickly, but as of the end of March we are still pushing forward with 5+ years of fairly impressive revenue growth. When/If things go south, I should see it in real time (not saying this is a leading indicator…just saying we’ll see it).

Sit back and enjoy the show!!

The US Daily Cash Surplus for Monday 3/30/2015 was $6.6B bringing the March 2015 Deficit through 30 days to $11B

I finally had a chance to rig up some new charts….let’s walk through the disclaimers. First off…as discussed in earlier posts….Treasury deploying “Extrordinary Measures”(EM) nukes my old process. Essentially…they take debt off of the balance sheet and pretend like it doesn’t exist. So…what happens when they use their magic want to make say $10B disappear? Well…every accounting entry has an offsetting entry, and this one pops up as a $10B surplus….except that it’s fake. I can roughly back out this effect, but will need to true it up once the debt limit is raised and EM are all brought back on the balance sheet. I would guess this adds a $5-10B margin of error per month…probably on the lower end, but who knows..

So here we go. Revenues look great…+$63B and +30%. Of course…$35B of that was from the FCC spectrum auction. Still…not too shabby, though I think 3/31 revenue will be down quite a bit YOY on dissapointing Freddie/Fannie payments….pulling us back down a bit for the full month from where we are today, but it will still go down as a great revenue month.

Outlays are sitting at $+29B. $6B of this is interest timing, and another $10B is the extra day March 2015 has over March 2014. That leaves $13B of bonafide growth….$8B or so looks like Medicaid, which ended 2014 at $23B but looks to end March 2015 at around $31B. If that sticks, Medicaid growth for the first quarter of 2015 is going to be up about 22% over 1Q 2014, and 40% over 1Q 2013. I had expected that growth rate to temper a bit this year, but it’s actually a little higher than last year.

And finally, the deficit at $11B is more or less in line with expectations, but a little worse than my initial forecast at a $5B surplus. Last March ended up with a $31B deficit, so we will definitely end up better than that….if that’s a victory, we’ll take it.

I’ve been away for a week, so lets take a look back for a recap. Friday 3/13 posted a $6.5B surplus, followed by a nearly $50B surplus on Monday on strong tax deposits. This wasn’t unexpected….last year Monday 3/17 posted a $44B surplus. Since Monday, inclusive of Friday 3/20, we ran $26B of deficit. So now we’re back up to speed….just one problem….the Debt Limit, which was set 3/15 at  $18.113B.

The basic methodology for calculating the cash deficit is to look at the change in cash and external debt. When Treasury employs “Extrordinary Measures”(EM) it is essentially taking certain types of debt owed off the balance sheet, and pretending like they no longer exist. In 2013, over a ~6 month period, they hid $328B in this fashion, allowing them to issue new debt in the meantime, before bringing it all back on the balance sheet once the debt limit was raised. This kind of nukes my basic calculation….for example, Tuesday 3/17…Treasury issued $1.120B of new debt, and redeemed $0.935B. Quick math tells us that external debt should rise about $185M. However, what actually happened was that public debt outstanding decreased by $10.6B….That’s “EM” in a nutshell. Take 10.6B…pretend it doesn’t exist, and replace it with new debt. In this case it happened to be replaced with Intragovernmental debt, which I tend to ignore anyway, but it could have just as easily been $10B of fresh new 30 year bonds.

Long story short, this nukes my calculations in the short run until EM is over, at which point I can figure out the true deficit over the affected period. But don’t fret….I won’t be on hiatus until then. What I will do is back into the EM, and from there calculate a deficit figure. It will have a larger margin of error, maybe $500M+/- per day, and maybe $5-10B over the month….I won’t know for sure until the debt limit is raised or dropped again(which could be next year!!) Sorry…no charts today…I have the additional fields ready to go, but have not reconfigured the charts….hopefully later this week if not tomorrow. I can say that the March 2015 Surplus through 20 days is sitting at $13B. EM is at ~$22B so far, and revenues are looking solid even after pulling out the FCC revenue. My initial forecast of a $5B surplus is still looking pretty solid.

The US Daily Cash Deficit for Wednesday 3/11/2015 was $14.7B bringing the March 2015 deficit through 11 days to $11B.

Not a whole lot of change since the last report. Pulling out the $35B FCC cash revenue, we are running a little bit ahead of last year on revenues. Individual refunds continue to keep pace YOY, while business tax refunds are double…$5.1B compared to $2.5B last year.

And with that….time for Spring Break!! Next post will likely be 3/23

The US Daily Cash Surplus for Monday 3/9/2015 was $9.6B pushing the Surplus through 9 days to $11B. It’s funny…back when I started(and named) this blog near the end of 2012…I would actually put the word Surplus in bold and italics when it happened, which wasn’t a whole lot. At least things aren’t that bad right?

Since my last post, we’ve had another $3B in deposits from the FCC bringing the total for the month to $35B….Still curious that reports peg the haul from the spectrum auction at nearly $45B…maybe they are still awaiting payment on the remaining $10B and we’ll see it over the next few weeks? In any case, primarily due to the FCC deposits, cash revenues are at +$39B through 9 days, good for a 59% YOY improvement. Ignoring the FCC cash, we still see improvement with withheld taxes up about 4%, with immaterial declines so far in corporate taxes and taxes not withheld.

Outlays are up $8B, $6B of which is interest timing, laving adjusted outlays at +2%. Individual refunds are still fairly flat, down only $1B or 4%. Business tax refunds are noticably up, though much smaller at $2.9B in March 2015 vs $1.8B last March. For the Year, business tax refunds are up 60% from $8.6B in 2014 to $13.7 in 2015 through 69 days. It’s not a big number, and maybe it’s not a big deal, but generally, this would mean corporate profits are down….

And now for the biggest non story… the Debt Limit. You may recall that last year the debt limit was suspended until March 15 2015…which is Sunday. Nothing that i have read indicates a battle is forthcoming, but I wouldn’t expect a deal by Friday either. That’s ok though, because if you are going to pick a time to hit the debt limit, March 15th is a pretty darn good day to do it. The actual time to run out of cash is a function of your cash in hand on D Day, the amount you can squeeze from extraordinary measures(EM), and the projected cash deficits over the coming months. Now let’s say we end Friday with $50B of cash, and that Lew can squeeze $350B out of EM. First thing monday morning, we should get ~$20B of corporate taxes, and more or less run a small surplus for the rest of March. Then comes April, which should run just shy of a $200B surplus, lets put it at $175B. that puts cash in hand 4/30 at $225B, and you haven’t even really had to tap into EM yet, which means we have nearly a $575B “cushion” to play with. The official estimate is that this gets us to October/November, but my math puts it all the way into next February. There are a lot of wild ass guesses in there, but this doesn’t seem nearly as critical as it has in the past, often right before tax refund season.

That said…I still hate the prospect of EM because it does a number on my cash deficit calculations. Essentially, treasury pulls debt off the balance sheet and pretends like it doesn’t exist so they can issue more and still stay under the limit. I can more or less account for it, but it’s a pain, and I’d rather not. Furthermore, I can’t tie everything back to the penny until after EM is wrapped up, which could be months…or a year 🙁 . So here’s to hoping they wrap this nonsense up in March…