Dec 05
0

November US Cash Deficit $161B

By | Daily Deficit

The US Cash Deficit for November came in at $161B compared to $157B last year pushing the 2017 cash deficit through 11 months to $700B, $17B over last year’s $683B.

No real surprises here…revenues and outlays are up about 3%, and with the bigger base of outlays, we have a small increase in the deficit through 11 months.

December, as a quarter end  should bring in quite a bit of extra revenue and should post just a small deficit assuming all of the timing issues flow through the same…last year was just $14B…my current model has this December at a $9B cash deficit.

So…with 11 months in the books, absent a surprise, it looks like the deficit will surpass $700B and continue growing for the second year in a row. There is a lot of uncertainty about 2018…I am still trying to wrap my mind around the tax cuts, but my wild guess with very little analysis would be tax cuts keep revenue growth flat…and outlays grow at 3-4%….that would put the 2018 deficit at a little over $800B….if revenues decrease we could be knocking on $1T a year in just a few years time.

Nov 02
0

October US Cash Deficit $60B

By | Daily Deficit

We now have the finals for October which clocked a $60B cash deficit.

Revenues were solid, up $15B, but there was an extra day so it’s not as impressive…but still good 🙂

However, outlays were up $30B…some timing, some because of the extra day, and a good chunk of debt issued at a discount….nearly $10B when a normal month may be at $5B. The deal with this is…say Treasury issues a $100 12 month bill for $99….they get $99 of cash, but debt increases $100B. Now in a perfect world I would amortize that $1 over the year, but to avoid a lot of unnecessary complexity that would add little value…I essentially just book the interest expense when it is issued. Over the year….it should more or less pencil out, and it’s not material anyway…but now you know!! Anyway…I’ll keep an eye on it but it’s probably nothing.

Year To Date

Looking at the YTD…Revenue is solid(and boring) at +3.2% so are outlays at +3.1%. The 2017 YTD has now overtaken 2016 after trailing slightly for most of the year. It’s only at +$13B, but with 2 months to go 2017 is on track to top 2016’s $697B deficit by a little….then we go on to 2018…will it be more of the same, or will a tax cut actually sneak through and put us back over $1T?

November Outlook

Looking forward to November, I am expecting about a $150B, in line with last November driven by lower revenues and rising outlays, including about $42B of interest payments.

Oct 03
0

September 2017 US Cash Deficit $14B

By | Daily Deficit

Revenue flat and outlays up a bit, pushing the September Cash deficit from $5B last year to $14B. September will generally run a small surplus due to quarter end tax inflows, but for 2 years in a row now October 1 has been on the weekend, pulling about $40B net of October outflows due October 1 into September……going out 9-29 instead. It’s just a timing issue…Septembers loss is Octobers gain.

Looking at the 2017 through 9 months, revenue is up 2.9% and outlays are up 2.4%…and they more or less cancel each other out, leaving the annual deficit at $478B, just $3B lower than last year. With 3 months left, there is no reason to expect a material variance for the year…2016’s full year cash deficit was $697B…2017 should be right around there. 2018 will probably look similar as well, with both outlays and revenue growing at 2-3% . So…we have a new baseline…a $700B annual cash burn…for now…all it will take is a war, a recession, tax cuts, or all 3 and this new normal….as terrible as it is…could get a lot worse fast.

 

Sep 14
0

Temporary Debt Limit Deal Reached (9-2017)

By | Daily Deficit, Debt Limit

As mentioned in the last post, a deal to increase the debt limit (technically suspend until December 8) was reached…supposedly between Trump and the Democrats, but that story seems a little silly to me, not that it matters.

So, last Friday, Treasury pulled all of the “Extraordinary Measures” (EM) IOU’s out of the coffee can and made them official, pushing the total debt outstanding up by $317B. Again, nothing shocking at all.

As I have complained mightily about in the past, these shenanigans nuke my simple cash deficit calculations, but I am able estimate them. Now that EM is over and the debt is once again properly accounted for, and I can now calculate it to the penny again. Over nearly six months of EM, my estimates were only off by $5.5B….or $1B per month, which was better than previous EM periods, though honestly nothing about my process has changed. What that means is that just last week I had the August YTD deficit at $460B….these revisions push it up to $465B….so no real material change….The 2017 deficit is pretty much in line with the 2016 deficit which was $476B through 8 months.

My thoughts on the debt limit….it is still just a really bad joke. I get the principle….but am still forced to see that it has failed completely so many times for so many years. And then of course…can we really even call it a debt limit if Treasury can then circumvent it using laws/rules passed by congress for six full months, and $317B? I’m in favor of scrapping the whole silly thing, but perhaps we should at least stop calling it a “debt limit”….maybe we should call it a “Red Line”…LOL (too soon??).

Here is the deal…the US government has a baseline deficit at the moment of about $600-$700B….same as last year. As it stands, this budget is “un-balancable” (probably a made up word 🙂 ), and therefore the debt is unpayable. Sure, we can roll it for a while, maybe a long while, but we can never pay it off.

In order to change the baseline above…. something drastic must change, probably on the spending side of the deficit equation. Nearly half of the annual spending can be attributed to just 3 things…Social Security, Medicare, and Medicaid at nearly $2T/Y. You simply can’t plug that $700B hole, or even make a dent in it with out materially changing these programs, and yet, not a peep. That’s why it pisses me off to hear the Republicans in particular pretend like they care about this issue….then come up with some crazy optimistic proposals about how they are going to “save” $500B….over 10 years. That’s not even worth talking about….if you care about the debt/deficit…come up with a plan to save $10T over 10 years…or don’t even bother trying.

 

One final thought….now that the EM cannon has been reloaded with a fresh ~$350B, don’t be surprised if the debt limit has in actuality been pushed out not just a few months, but possibly all the way out to next summer. The timing isn’t as good for Treasury this time around….last year EM went into effect just after the heavy tax refunds had gone out in February and just before the heavy tax payments of April. This probably would have got them well into October if the hurricanes Harvey/Irma hadn’t given them the cover they needed to extend it sooner. This time around, it will be much tighter. They may not make it through tax refund season without running out of cash, but if they somehow can make it to April when cash starts flowing back in they can probably make it through the summer again…I hope it doesn’t…watching this stupid game year after year is kind of a downer!!

Sep 07
0

August 2017 Cash Deficit: $158B

By | Daily Deficit

The estimated US Cash Deficit for August 2017 came in at $158B, $7B higher than last August as revenue faltered and outlays were up a smidge. Looking at the YTD revenues are running 3.3% higher while outlays are running 2.1% higher, and at $460B, the deficit through 8 months is 16B under last year’s $476B.

No real surprises here, though I did expect revenue to come in a bit higher than last year even with unfavorable timing of the days this month.

Looking to September, revenues will pick up on the quarter end and lead us to post a solid surplus starting around the 15th when corporate taxes are due. We should end with a $25B-$50B surplus without any surprises.

Debt Limit Update:

On the heavy $158B deficit, cash balances fell from $189B to $55B in August with press releases indicating that cash could run dry by mid October if not sooner unless the debt limit is raised. As I write this 9/7/2017, I see some reports that Trump may be close to making a deal with Democrats to either raise or maybe even permanently get rid of the debt limit. Nothings official, and details are fuzzy and contradictory, but I for one hope they just git rid of the debt limit, which has been a complete and total failure for so long, it’s simply time to eliminate the silly thing. Also… as I have discussed in detail in the past, the Extraordinary Measures (EM) treasury employs to circumvent (legally??) the debt limit nukes my direct cash deficit calculation by hiding debt off the balance sheet, which drives the accountant in me batty.

Stay tuned…if some kind of debt limit deal is reached and EM is reversed, we should see ~350B of debt get pulled back onto the balance sheet, and I should be able to go back and recalculate the cash deficits for March-August with real, rather than estimated numbers. Don’t expect any huge changes, but this has been an odd EM session so who knows……I’ll let you know as soon as I do.