The official Monthly Treasury Statement for February came out Wednesday showing a deficit for the month of $204 billion, basically the same as the Congressional Budget Office predicted several days earlier. The reported deficit through five months of the fiscal year is $494 billion, down from $580 billion a year earlier.
That February result was an "improvement" of $28 billion over the $232 billion deficit seen in February 2012. Unfortunately, the two main reasons for the difference demonstrate that the economy really isn't any better than it was a year ago. $20 billion of the difference occurred because the IRS was slower in sending out tax refunds than it was in 2012 because of the late passage of tax-related fiscal cliff measures in early January. The rest of the improvement can be traced to the repeal of the 2-point payroll tax cut which had been in place during calendar 2011 and 2012. Since February 2013 outlays were almost $9 billion lower than February 2012, one could argue that the economy actually did a worse job of generating taxes for the government than it did a year ago. Nevertheless, as would be expected, Christopher Rugaber at the Associated Press, aka the Administration's Press, cited "an improving economy":
US BUDGET DEFICIT JUMPS IN FEBRUARY BY $204B
The U.S. federal budget deficit jumped in February from January, though it is still running well below last year's pace. Higher taxes and an improving economy are expected to hold the annual deficit below $1 trillion for the first time since President Barack Obama took office.
The Treasury Department said Wednesday that the deficit grew in February by $203.5 billion. That followed a small surplus of $2.9 billion in January. And February's gap was $28 billon smaller than the same month a year ago.
... Modest economic growth has also boosted federal tax receipts. Last year, the economy grew at a modest 2.2 percent and generated an average of about 180,000 jobs a month. Job growth has topped 200,000, however, for the past four months. More jobs mean more income, which generates more tax revenue for the government.
Except that, after considering the slow timing of tax refunds, the economy didn't generate extra "revenue" in February compared to a year ago, and here's the likely reason why: Part-time workers.
The respected web site Trimtabs estimated, based on its analysis of federal payroll-related tax deposits, that the economy added only 100,000 (one presumes seasonally adjusted) jobs in February. How does one attempt to reconcile the difference between that 100K and the government's seasonally adjusted figure of 236,000? I believe that the answer may be that Trimtabs, without fully appreciating it, is really measuring the increase in full-time equivalent employees, while each seasonally adjusted part-timer is a separate job in the government's report. If I'm right, that's scary. If anyone has a better theory as to why the calculated employment increase based on tax collections is far less than the government's official number, I'd like to see it.
Oh, and if Trimtabs' estimate isn't seasonally adjusted, look out below. The raw number of jobs added in February per the government (i.e., before seasonaly adjusted) was 959,000. If Trimtabs is really showing only 11% of that in its 100,000 figure, something is truly amiss.
None of these painful details concerned Rugaber, whose third-last paragraph also requires a correction:
The budget gaps in 2010 and 2011 were slightly lower than the 2009 deficit as a gradually strengthening economy generated more tax revenue.
What he wrote is true of the reported budget gaps. But it's not true of the budget gaps after corrections for non-cash TARP-related accounting entries (explained in painful detail here and here) which pushed well over $100 billion in losses which didn't take place into fiscal 2009 for what appears to have been the express purpose of making fiscal 2010 and 2011 look better by reversing those ficititious losses and recognizing noncash gains. As seen in the graphic below prepared in April 2011, after correcting for these shenanigans, fiscal 2010 had a larger deficit than fiscal 2009:
The cash deficit grew in 2010 because spending continued to rise, and because the economy barely improved.
Cross-posted at BizzyBlog.com.
