June Federal Receipts: The Dive Continues, As Does Media Near Silence
As we near the end of June, which is supposed to be one of the four biggest months for federal tax collections (January, April, and September are the others), it is clear that the serious receipts shortfalls are not only continuing, but have caused the March 20 projections of the administration and the Congressional Budget Office (CBO) to be outdated.
Media coverage of the ongoing receipts dive has been minimal at best. A Google News search on "federal receipts" (typed in quotes) returns on seven items, two of them originating from yours truly.
Comparing June 26, 2009 to June 27, 2008 is more valid than comparing the same days of both years, because each period contains the same number of Mondays, a big day for receipts, and Fridays, a big day for sending out refund checks.
As you can see, as we approach the end of the month, June 2009 receipts from economic activity are down 25% from last year. It's clear from last year's results that it would be unreasonable to expect a high level of receipts from other than withholdings in the final two days of this year.
Estimating on what I believe is the high side, it looks like total June 2009 receipts will come in at about $230 billion, consisting of about $198 billion in the line items identified above (i.e., another $13.2 billion will come in during the final two days) plus $32 billion in other receipts. That would be a 12% drop from last year's official total, but a 20% drop from last year's $287.8 billion in total receipts from economic activity.
Looking forward to the rest of the year, I estimate the following results based on how the government defines receipts:
I believe these estimates, if anything, are on the high side. July 2009 will probably come in at 90% or worse compared to July 2008, because July 2008 had over $13 billion in stimulus payments, which Uncle Sam (erroneously, in my opinion) treated as negative receipts instead of outlays. August 2009, vs. August 2008 will be worse than July, because August 2008 stimulus payments were barely $1 billion. September 2009 vs. will probably be even worse than the previous two months, because that month is heavily influenced by corporate income and non-withheld tax receipts, which as you can see above have fallen far more than the overall average. Also note that August and September of 2009 will show year-over-year declines for the second straight year. Monthly year-over-year receipts from economic activity increased for an almost unbroken string of four years up until August of last year, when the recession as normal people define it began.
You can also see that my full-year receipts estimate is almost $60 billion, or 2.8%, below the CBO's March 20 estimate (PDF) based on budget information supplied to it by the White House, and 4% below the White House's own estimate based on the same underlying information CBO used.
As I mentioned in a June 20 post (at NewsBusters; at BizzyBlog), the repayments of roughly $68 billion of TARP money during June by many of the larger banks are not being treated as receipts by Uncle Sam, because the original TARP disbursements/"investments" were not treated as outlays. More on how "Net Present Value" accounting is rendering almost indecipherable federal financial information that used to be mostly understandable is here.
When federal spending is hemorrhaging in the hundreds of billions and trillions, it may seem relatively unimportant to focus on differences of less than $100 billion in receipts. But that is far from the case. First, the declines are far more than what one would expect from an economy that has contracted by about 3.2% (non-annualized) in the past three reported quarters, indicating that something beyond normal business reactions is at work here. Second, the steeper the receipts decline, the smaller the foundation on which to build an economic recovery will be, and the more likely it is that the administration will give us a fake hand-wring and push tax increases as the only answer to the shortfall -- even though tax increases, based on history, would more than likely extend the economic spiral instead of stopping it.
Cross-posted at BizzyBlog.com.