Missing Fed Budget Story: Rising Revenue Still Miles Below Fiscal 2008
Sunday evening (at NewsBusters; at BizzyBlog), I predicted that the press will ignore the likelihood, based on the Congressional Budget Office's most recent Monthly Budget Review, that officially reported federal spending will top $1 trillion for the first time during a three-month period (i.e., for February through April 2010) when the Tim Geithner's gang issues its Monthly Treasury Statement on Wednesday afternoon.
You can also pretty much count on the fact that the press will greet an uptick in April and year-to-date 2011 collections as something impressive. In historical context, as the graphic after the jump will show, it absolutely is not.
With real economic output finally back to where it was in the second quarter of 2008, after which the recession as normal people define it began, you would think that federal collections would have recovered impressively from their dismal 2009 and 2010 levels and start getting into the neighborhood of where they were in fiscal 2008. After all, if we're to believe the official recession identifiers at the National Bureau of Economic Research (which I don't), by April of 2008 we were in the fifth month of a recession that started in December 2007. That's pretty remarkable, because while economic growth during the second quarter of 2008 wasn't impressive, it was nonetheless positive, and collections during April 2008, which I described as the "supply-side stunner" three years ago, reached an all-time single month high.
Compare April 2008, and while we're at it, the year-to-date totals in fiscal 2008 to the dismal performances of the last three years:
In April 2011, monthly and year-to-date income tax collections will come in 37% and 16% lower than the respective figures in April 2008, even though we are still operating under essentially the same income tax rate structure (i.e., we're in the ninth year under what are still referred to as the "Bush tax cuts" by the never-let-it-go establishment press). Social insurance collections are also down, but that's largely because of the 2% payroll tax cut that went into effect in January. Without that, April 2011 would roughly have matched 2008 for both the month and the fiscal year to date.
The shortfall in corporate income tax collections is not as steep in dollars as the decline in income tax collections, but in percentage terms (53% year-to-date) it's even worse. What's more, in fiscal 2007 year-to-date corporate income tax collections, at $201 billion, were even higher than fiscal 2008. Corporate tax collections have yet to come anywhere close to recovering from the recession, and they're already showing signs of topping out. You might think that an administration which is constantly carping about the need to collect more taxes and which is suffering from low corporate receipts might conclude that setting companies free from ridiculous regulations, onerous environmental strictures, NLRB thuggery, and other impediments to efficiently doing business would be a good way to increase those collections, just like in 2007 and 2008. Dream on. They don't care about increasing collections unless it involves increasing tax rates.
Another factor making fiscal 2011 far less impressive than fiscal 2008 is that fiscal 2011 includes tens of billions in remittances to the treasury from Fed Chairman Ben Bernanke's "quantitative easing" efforts. While these dollars make the numbers look a little better, such collections do not result from productive economic activity. Thus, the overall picture is even worse than indicated in the above graphic.
So while we can expect to hear the folks at the Associated Press and elsewhere highlight how fabulous and marvelous monthly and year-to-date collections in April 2011 were compared to 2010 and maybe even 2009, we probably won't hear much about how they're still far, far lower than those seen during that awful, supposedly mostly recessionary fiscal year 2008. And we all know why.
Cross-posted at BizzyBlog.com.