Deficit Comes In Just Below CBO Estimate; Economists' Predictions Were Way Low. Why?
The government issues Daily Treasury Statements telling everybody what went in and out on a given business day. At the end of the month, the last Daily Treasury Statement has a record (admittedly jumbled and larded with lots of bureaucratic excess) of all receipts and disbursements for the month.
The folks at the Congressional Budget Office look over the final Daily Treasury Statement and estimate what the totals for receipts and disbursements (or "outlays") will be. The difference, obviously, is their estimate of the month's reported deficit. The only remaining items should be error corrections (if any), or accounting entries resulting from the government's ill-advised choice to account for "investments" in banks, car companies, and other entities on a "net present value" basis.
On the eighth business day of the following month, the Treasury Department releases its Monthly Treasury Statement.
On Friday, the CBO estimated that the April's deficit would be $85 billion. The press (as covered at NewsBusters; at BizzyBlog) virtually ignored its report. That's bad enough, but when reporters went out to economists for deficit estimates, their predictions were significantly lower. For starters, here's what the Associated Press carried this morning:
The AP's $30 billion consensus sharply differed CBO's estimate, yet the rest of the AP's report failed to even acknowledge the existence of the variance, or for that matter of the CBO.
Other news sources also came in with lower April deficit estimates, but not by as much as AP's:
- Bloomberg/Business Week had a median estimate of $57.9 billion, as "Projections ranged from deficits of $20 billion to $90 billion."
- This Inside Futures post had an estimate of $59.8 billion.
- This Citizen Economists item claimed a consensus of $40 billion.
CBO overestimated the deficit by only $2.3 billion.
As stated earlier, unless there are "net present value" entries, estimating the deficit shouldn't be that tough, as CBO has just demonstrated. So why was there such an across-the-board lowball consensus among the economists consulted by the press?
All I'll say is that it's mighty, mighty convenient that the early morning drive-time, get-ready-for-work reports based on the AP item above told radio and TV audiences that the year-to-date deficit would come in "about 7% lower than a year ago." The fact is that it has barely budged (the $799.7 billion above is only $2.6 billion lower than last year's $802.3 billion). After considering the $115 billion non-cash item noted in the last paragraph of the AP excerpt above, the true cash spending deficit is about $915 billion, or 14% higher than last year's year-to-date figure.
All of this is likely to get ignored in the rush of other afternoon and evening news, leaving many listeners and viewers believing that the government's financial situation is improving. It isn't. Again, how convenient.
Now that the Monthly Treasury Statement has been published, I'll have more to say about the establishment media's coverage in a later post.
Cross-posted at BizzyBlog.com.