Daily Deficit

The US Daily Cash Surplus for Wednesday 2/5/2014 was $5.1B bringing the February 2014 Deficit through 5 days down to $8B.

Curiously….still no material increase in tax refunds showing up on the DTS yet…. This seems a bit odd given the debt limit going back into effect tomorrow. You see, until tomorrow, there is no debt limit. They could issue $200B of debt to pay for $200B of tax refunds by tomorrow afternoon and it would be all good. However…after tomorrow….the ability to borrow is pretty much locked down and limited to “extraordinary” measures.

So…just to look back at last year….Filing began Wednesday 1/30/2013….and two days later on Friday 2/1, ~$4B per day of refunds started flowing out per day. This year, filing starts Friday 1/31…and by 5 days later…nada.

Obviously I have no proof….but If I were Obama….this is what I’d be doing as well. Why risk drawing this silly little game out for months? By delaying payments until after the debt ceiling goes into effect, perhaps they are ensuring this round is over and done by the end of February. Also…it’s likely that any day they will start talking about how tax refunds won’t be paid unless the debt ceiling is raised….which will become technically true before too long. That’s going to make it extremely difficult for Republicans to gain any leverage or put up much of a fight….not that they would have anyway.

So as it stands, we have the illusion of a very good month….already with a deficit $58B lower than last year. This one could get crazy quick, so for now all we can do is sit back and watch.

The US Daily Cash Deficit for Tuesday 2/4/2014 was $4.3B following 2/3’s unreported(by me) $8.6B deficit, bringing the February 2014 cash deficit through 4 days to $13B.

Compared to last year at a $64B deficit …we actually look pretty good. However, most of that is related to ~$35B or so of outlays that went out 1/31 in 2014, but went out 2/1 in 2013, creating a $35B swing between months. The other big variance I can see is tax refunds. I account for tax refunds as a reduction in revenue when issued….so on a day where we have $10B of revenue, but $5B of refunds, I would show net revenues at $5B for the day. Curiously, per google, the first day you could file 2012 tax returns last year was 1/30. This year, you could start filing 2013 returns 1/31. However, last year, refunds started pouring out just 2 days later…$4B on 2/1/2013. By Tuesday 2/5/2013, the total was up to $10.5B for the month.

This year, though delayed by only an additional day, we have seen a total of only $41 million….practically nothing. This is giving 2/2014 a $10B YOY boost that will continue to grow until we start seeing tax refunds flow out of federal coffers. For now, we’ll chalk it up to timing and assume it will even itself out by the end of the month.

Speaking of timing, I have taken the liberty of syncing up the YOY based on the day of week as I typically do early in the month. So we are comparing February 2013 through Tuesday 2/5/2013 vs February 2014 through Tuesday 2/4/2014. This will more or less sync up the large revenues and outlays, though as noted above, we are starting out with some large timing issues.

February typically posts the largest deficit of the year due to tax refunds being issued throughout the month. Last year, a total of $114B of refunds were issued to individuals, pulling net revenues down to only $95B….less than 1/4 of the April 2013 revenues of $418B. The February 2013 deficit ended up at $229B. For 2014, my model currently has it pegged at $224B, but if tax refunds continue to fall short…coming in under $200B is a definite possibility.

The US Daily Cash Deficit for Friday 1/31/2014 was $36.9B pushing the January 2014 cash deficit for the full month to $24B compared to $32B in January 2013.

Revenue was up 9.6% on the month….a $28B increase. Outlays appeared to be up, but once you back out timing were actually down about $15B. I’m still not convinced it is sustainable, but I can’t deny that at first glance, 2014 is off too a much better start than I imagined it would…..adjusted for timing this would have been a $40-$45B year over year beat. We’ll take it!!

The US Daily Cash Deficit for Thursday 1/30/2014 was $5.9B bringing the January 2014 cash surplus with one business day remaining to $12B.

Revenues are now sitting at $+24B….There is a good chance we will build on that some more just due to 1/31/2013 being a Thursday with typically weak revenues vs. 1/31/2014 being a Friday…which generally has moderate revenues. Bottom line…an impressive +10% is definitely within reach.

As noted before, Friday 1/31 will likely have very strong outlays as payments due Saturday 2/1 will instead be made 1/31…and thus pulled into January. This normally happens a few times each year and just glancing back, we can probably expect a $30B deficit….flipping our current $12B surplus into a ~$15B-$20B deficit….if the pattern holds.

The US Daily Cash Surplus for Wednesday 1/29/2014 was $5.5B bumping the January 2014 surplus back up to $18B with two business days remaining.

It was another good day on the revenue front thanks in part to a $2B bump from “Federal Reserve Earnings.” Of course….the game here is that the Federal reserve essentially prints their own money, and with it has purchased about $4T worth of securities…including $2.2T of treasury notes (US Federal Debt) and $1.5T of mortgage backed securities. Now, whenever treasury makes a debt payment on a bond owned by the Fed….the Fed turns right back around and sends it back to Treasury. It’s a nice little game I suppose….what could go wrong? In any case…this little game nets the government a cool ~$80B per year of revenues per my math, but who knows how they account for that…negative interest expense?? I suppose it’s whatever they want it to be.

Moving on, Withheld tax deposits are sitting at +8%, taxes not withheld are at +9%, and corporate taxes are up at +16%, though that’s only $1.4B. Total cash revenues (including Fed reserve “earnings”) are at +11%. For comparison, my initial estimate for the month was +7% for total revenues, so there is not doubt, at this point revenues are over performing in my mind….I suppose we should all hope this holds up….unless you are the one paying that additional 11%.