Daily Deficit

The US Daily Cash Deficit for 5/3/2013 was $20.8B bringing the May 2013 deficit through 3 days to $45B. The large deficit was primarily caused by Social Security payments of $24B… Social Security payments go out in 4 rounds throughout the month. The first and largest at ~$25B goes out the 3rd….but is bumped up if the third falls on a weekend or holiday. The next three rounds go out the 2nd-4th Wednesdays of the month, each at $11-$12B. Because of this, it isn’t surprising that we almost always see a deficit on Wednesdays.

Looking at the charts…through 3 days, all is pretty much in line with last May…..certainly nothing indicating 15%+ revenues, but the month is young. If this month follows last years script, the rest of the month should be a gentle accumulation running up to about $100B…probably more.

Two notable events stand out. On 5/15 a large interest payment around $30B will go out….giving us some insight into how ZIRP manipulation is going. For a few months now, monthly interest paid has actually come in lower YOY, despite having an additional $1T of debt. So savings from lower interest rates are more than offsetting the growing principle….hey…it’s a good deal if you can get it. However, March and April are very light in interest payments anyway…May provides us about $35B or so…twice the last two months combined, so a much better glimpse. I’m not expecting anything, but always on the lookout.

In my data series…which goes back to 2000 (and a few months of 1999) I see a high of 4.639% in 12/2001, and a new low last month at 1.837%. What we are looking for is a bottom, and a new trend back up above 2%….that’s when the trouble starts.

The second notable event will be 5/31…a Friday, when we will probably see about $20B or so of payments due 6/1 be paid out a day early. This may be enough to push the May deficit into the $125-$150B ballpark…but it all depends on what happens with revenue. This same cost shift also makes it likely that June 2013 will run a surplus…we’ll see.

The US Daily Cash Surplus for 5/2/2013 was $1.8B on $9.9B in revenues and $8.1B of outlays leaving the May 2013 deficit through 2 days at $24B.

So far nothing out of the ordinary, but it did occur to me that with 5/31 being on a Friday, we will probably see about $20B of payments due 6/1 instead go out 5/31, essentially increasing the May deficit, and decreasing the June deficit by the same.

As you know, I am keeping a very close eye on revenues to see if what happened last month was a fluke, or an actual shift in the curve. 2 days is way to soon to tell much of anything, but it is worth noting that tax deposits not withheld…which grew 40% in April….have absolutely fallen off a cliff from $6.2B 4/30 to $327M yesterday. A drop off was expected, but I figured it would glide down under $1B over a week or so….not just stop once May came around.

Just a quick post to record the finals…more detailed analysis to come… The April 2013 Cash Surplus rings in at $117B compared to a $59B surplus in April 2012. The main story all month was revenues…up $87B…a 26% increase. Taxes withheld were up 10% as expected, but corporate tax receipts were up 27% and tax deposits not withheld were up a whopping 40%…or $56B. The revenue increases were somewhat offset by a $29B increase in outlays primarily related to timing.

So what does it all mean? Are we saved? Should we stop worrying about the deficit? Absolutely not. While it shouldn’t be dismissed, in the big picture, this is one month, and one $58B improvement…compared to an annual deficit still likely to be north of $850B, and debt outstanding of $16.8B. Give me two straight years of 26% growth and I’ll be forced to re-evaluate my central thesis. For now, it’s time to appreciate an admittedly impressive month, then sit back and see how the rest of the quarter turns out.

The US Daily Cash Surplus for 4/26/2013 was $4.6B. Revenues continue to outpace April 2012 by a healthy 23% pace, but are following a similar downward slope the further we get from 4/15. The 4/2013 surplus through 26 days stands at $102B with 2 business days remaining. This is likely to continue growing with strong Monday revenues today, $110B seems possible, but end of month is often tricky to forecast…sometimes we see large outlays flow through…I am expecting $8B or so of interest payments 4/30…and I never know when Medicare payments are going out…so a spike there could offset an otherwise strong finish.

The US Daily Cash Surplus for 4/25/2013 was $4.7B…pushing us back into surplus after yesterday’s brief return to normalcy. The category “Individual Income and Employment Taxes Not Withheld” continues to lead the charge. This category represents taxes not withheld directly from a paycheck…for example if you owed taxes and mailed a check on 4/15… Or if you were an investor with a large capital gains.. YOY through 25 days, this category is up from 131B in 4/2012 to $174B in 4/2013. This is good for about 65% of the total $69B revenue gain we’ve seen, with the balance being in Corporate Taxes, Taxes withheld, and other misc. categories. Withheld taxes are up about 8.4%…consistent with the rest of the year.

With 3 days left, the main thing I am interested in is the YOY interest payments…last year they came in at $15.3B for the month. Debt has increased about $1T in the last year, but effective interest rates have inched down a bit as well. I’m not expecting any huge changes, but this is one of the categories I keep a close eye on because if/when treasury loses control of interest rates, it’s pretty much game over because zero% is just about all we can afford to pay anyway. As of the end of March, I had the effective rate at 1.85%. A jump of just 1% would mean an additional $120B per year of deficits….a number that will grow along with our debt once we say goodbye to April.