U.S. Gov’t Spent More Than Eight Times Its Monthly Revenue In March

[michaelsuede]

Fascist Soup reports:

The criminal mafia you call the Federal Government has managed to spend 8 times more money than it forcibly took from you during the month of March.

How is this possible? When you have access to Federal Reserve computer terminal, entering a few extra zeros to a bank account is pretty easy stuff.

Praise Mao and may the Bernank destroy what little remains of your non-existent savings accounts.

 

[ngc6205]

Did you bother to read the daily treasury statement? If you had and if you understood it, you would find that what Fascist Soup is claiming is simply not true.

 

[michaelsuede]

You mean this statement?

The one that demonstrates net tax revenue of $128.179 billion and $1.0528 trillion of net expenses?

Where exactly did CNS News go wrong?

The total incoming tax revenue, less refunds, comes to $128.179 billion.

The total expenses comes to $1.0528 trillion.

The total tax revenue is not the same as looking at the total deposits, which you obviously must be confused about. The total deposits includes debt financing. So the treasury borrowed to make up the difference and that borrowed money is included in the deposits side of the balance sheet.

This is obviously unsustainable and will result in a dollar implosion eventually.

 

[ngc6205]

You mean this statement?

The one that demonstrates net tax revenue of $128.179 billion and $1.0528 trillion of net expenses?

Where exactly did CNS News go wrong?

Yes, I mean that statement. CNS and Fascist Soup makes it sound like the government borrowed or had the Federal Reserve give the government an extra $924 billion in the month of March alone and that is simply not true. Yes, the government did pay out $1.12 trillion. However, that amount includes public debt redemption of $705 billion.

The government did issue additional debt to cover the Treasury securities that were paid off. Total public debt increased by $75.35 billion in the month according to the report. Without accounting for that, it is a falsehood to claim that the government spent eight times more than its revenue.

Let's look at an example of an individual. Let's say an individual earns $8,000 per month after taxes. Let's say his expenditures, not including paying on a debt, are $7,500. He goes to his bank and takes out a $60,000 loan. Using that $60,000, he pays off an existing loan of $57,000. He blows the other $3,000 on wine, women and song. Did this individual spend $67,500 this month? No, he did not. $57,000 of his total expenditures was what he had previously spent in the past. His real spending for the month was $10,500. Yes, that is more than he brought home and if he keeps it up, he will be in deep ca-ca.

If you want to complain that the U.S. Government spends too much and the debt is too high, fine, I agree with that sentiment. However, let's use reality to examine that point instead of picking and choosing numbers out of a report to make it sound worse than it really is.

 

[michaelsuede]

Yes, I mean that statement. CNS and Fascist Soup makes it sound like the government borrowed or had the Federal Reserve give the government an extra $924 billion in the month of March alone and that is simply not true. Yes, the government did pay out $1.12 trillion. However, that amount includes public debt redemption of $705 billion.

The government did issue additional debt to cover the Treasury securities that were paid off. Total public debt increased by $75.35 billion in the month according to the report. Without accounting for that, it is a falsehood to claim that the government spent eight times more than its revenue.

Let's look at an example of an individual. Let's say an individual earns $8,000 per month after taxes. Let's say his expenditures, not including paying on a debt, are $7,500. He goes to his bank and takes out a $60,000 loan. Using that $60,000, he pays off an existing loan of $57,000. He blows the other $3,000 on wine, women and song. Did this individual spend $67,500 this month? No, he did not. $57,000 of his total expenditures was what he had previously spent in the past. His real spending for the month was $10,500. Yes, that is more than he brought home and if he keeps it up, he will be in deep ca-ca.

If you want to complain that the U.S. Government spends too much and the debt is too high, fine, I agree with that sentiment. However, let's use reality to examine that point instead of picking and choosing numbers out of a report to make it sound worse than it really is.

The report headline is that the government spent 8 times its revenue collected.

This statement is absolutely true and correct.

Borrowing money to pay off existing debt in a revolving credit game where the banks get to skim off the top is patently absurd.

It is just as absurd for the government to do it as it is for the individual in your story to do it.

 

[ngc6205]

The report headline is that the government spent 8 times its revenue collected.

This statement is absolutely true and correct.

Borrowing money to pay off existing debt in a revolving credit game where the banks get to skim off the top is patently absurd.

It is just as absurd for the government to do it as it is for the individual in your story to do it.

No, it did not. The $705 billion of redeemed debt was spent in previous periods. It was NOT spent in March. Regardless, it is simply WRONG to take only ONE source of revenue out of the approximately two dozen sources of deposits and then compare that ONE source of revenue to ALL withdrawals.

As you said, the headline was the government spent 8 times its revenue collected, federal revenue consists of much more than just the tax deposits. Even if the redemption of debt was not considered to offset the borrowings, the expenditures still do NOT equal to 8 times revenue.

As I stated earlier, if you want to complain that the U.S. Government spends too much and the debt is too high, fine, I agree with that sentiment. However, let's use reality to examine that point instead of picking and choosing numbers out of a report to make it sound worse than it really is, which is what you are doing.

No, it is not absurd to refinance debt. People and all levels of government do it all the time. What is wrong or foolish, not absurd, is to refinance a debt with a higher amount and then waste the extra.

 

[Puppycow]

Borrowing money to pay off existing debt in a revolving credit game where the banks get to skim off the top is patently absurd.

Even for-profit companies do that though. It's how the economy works. If nobody ever borrowed any money, the economy would be a lot smaller and grow a lot slower.

 

[Saggy]

Just trying to start to clarify what is going on in the DAILY TREASURY STATEMENT....

Generally, the national debt is approx. 14T and is primarily in the form of outstanding Treasury bonds. And these bonds are coming due at the rate of 0.705T per month, as represented by the Public Debt Cash Redemp. (Table III-B) 705,266

Yes? No?

This begs the question, what is the structure of the national debt, i.e. what types of Treasury bonds. It seems like they're short term if the above is correct.

On the income side .. TABLE II — Deposits and Withdrawals of Operating Cash lists ...
FTD's Received (Table IV) .... 132,553
but then Table IV Federal Tax Deposits lists ...
Total $194,077

??? What's up with that.

 

[ngc6205]

Just trying to start to clarify what is going on in the DAILY TREASURY STATEMENT....

Generally, the national debt is approx. 14T and is primarily in the form of outstanding Treasury bonds. And these bonds are coming due at the rate of 0.705T per month, as represented by the Public Debt Cash Redemp. (Table III-B) 705,266

Yes? No?

The national debt is approximately $14.1 trillion. However, it is not all in the form outstanding Treasury bonds. It is primarily in the form of Treasury securities, which are in Cash Management Bills (CMBs), T-Bills, T-Notes, T-Bonds and TIPS.

This begs the question, what is the structure of the national debt, i.e. what types of Treasury bonds. It seems like they're short term if the above is correct.

Treasury securities vary in terms depending upon their type. CMBs are extremely short-term and are usually sold with 7 day to 56 day maturities. The Treasury auctions about $5 to $25 billion worth every few weeks. For every $25 billion offered, the Treasury receives about $100 billion to $150 billion in bids. T-Bills vary in maturity from 4-week to 52-weeks. T-Notes vary in maturity from 2 to 10 years. T-Bonds have 30-year maturities. TIPS typically have maturities between 10 and 30 years.

Treasury bills (T-Bills) are issued at a discount from face value and are paid at their par (face amount) at maturity. Currently, T-Bills have an annual interest rate between 0.00% and 0.27%.

Treasury notes, bonds, and TIPS are issued with a stated interest rate applied to the par amount and have semiannual interest payments. For TIPS, the interest payments and the final payment at maturity are based on the inflation-adjusted principal value of the security. T-Notes and T-Bonds have their interest rate set by the results of the auction. A 5-year T-Note currently sells at auction at an interest rate of about 2.25%. A 30-year bond currently sells at auction at an interest rate of about 4.6%.

As of March 31, 2011, the $9.65 trillion in debt held by the public breaks down as: $1.7 trillion in T-Bills, $5.84 trillion in T-Notes, $931 billion in T-Bonds, and $641 billion in TIPS. There is also $541 billion in nonmarketable securities. The $4.4 billion held by government trust funds are simply exchanged for new securities whenever they come due. The average interest rate on those is about 4%.

On the income side .. TABLE II — Deposits and Withdrawals of Operating Cash lists ...
FTD's Received (Table IV) .... 132,553
but then Table IV Federal Tax Deposits lists ...
Total $194,077

??? What's up with that.

If you look at the column of deposits you should see an entry "FTDs received". That entry includes tax receipts deposited in the U.S. Treasury accounts at the Federal Reserve either directly or through collector depositaries. The other $6.155 billion were from inter-agency transfers.

 

[Saggy]

The national debt is approximately $14.1 trillion. However, it is not all in the form outstanding Treasury bonds. It is primarily in the form of Treasury securities, which are in Cash Management Bills (CMBs), T-Bills, T-Notes, T-Bonds and TIPS.



Treasury securities vary in terms depending upon their type. CMBs are extremely short-term and are usually sold with 7 day to 56 day maturities. The Treasury auctions about $5 to $25 billion worth every few weeks. For every $25 billion offered, the Treasury receives about $100 billion to $150 billion in bids. T-Bills vary in maturity from 4-week to 52-weeks. T-Notes vary in maturity from 2 to 10 years. T-Bonds have 30-year maturities. TIPS typically have maturities between 10 and 30 years.

Treasury bills (T-Bills) are issued at a discount from face value and are paid at their par (face amount) at maturity. Currently, T-Bills have an annual interest rate between 0.00% and 0.27%.

Treasury notes, bonds, and TIPS are issued with a stated interest rate applied to the par amount and have semiannual interest payments. For TIPS, the interest payments and the final payment at maturity are based on the inflation-adjusted principal value of the security. T-Notes and T-Bonds have their interest rate set by the results of the auction. A 5-year T-Note currently sells at auction at an interest rate of about 2.25%. A 30-year bond currently sells at auction at an interest rate of about 4.6%.

As of March 31, 2011, the $9.65 trillion in debt held by the public breaks down as: $1.7 trillion in T-Bills, $5.84 trillion in T-Notes, $931 billion in T-Bonds, and $641 billion in TIPS. There is also $541 billion in nonmarketable securities. The $4.4 billion held by government trust funds are simply exchanged for new securities whenever they come due. The average interest rate on those is about 4%.



If you look at the column of deposits you should see an entry "FTDs received". That entry includes tax receipts deposited in the U.S. Treasury accounts at the Federal Reserve either directly or through collector depositaries. The other $6.155 billion were from inter-agency transfers.

Thanks. Numbers, I like em.

But, why in hell would anyone buy a 5 year T-Note at 2.25% when the return is going to be dwarfed by inflation. Ditto for all the denominations?

 

[ngc6205]

Thanks. Numbers, I like em.

But, why in hell would anyone buy a 5 year T-Note at 2.25% when the return is going to be dwarfed by inflation. Ditto for all the denominations?

You're welcome. People and institutions buy these securities at auction. The interest rate is set by the bids at auction. People and institutions accept this low interest rate mainly because Treasury securities are the lowest risk investments in the world. Basically, it is as close to guaranteed as anyone can get.

 

[michaelsuede]

As you said, the headline was the government spent 8 times its revenue collected, federal revenue consists of much more than just the tax deposits. Even if the redemption of debt was not considered to offset the borrowings, the expenditures still do NOT equal to 8 times revenue.

Yes, it does.

If you take into consideration the deductions listed by the news article.

Which is the entire point of this post.

So tell me oh wise one, what is the correct ratio of tax revenue collected to total monthly expenditures given that report, in your opinion?

 

[lomiller]

Yes, it does.

If you take into consideration the deductions listed by the news article.

Which is the entire point of this post.

So tell me oh wise one, what is the correct ratio of tax revenue collected to total monthly expenditures given that report, in your opinion?

Well you could start with a definitions that don’t say you can cut spending by increasing your costs...

 

[ngc6205]

So tell me oh wise one,

Sarcastic jabs are not required.

what is the correct ratio of tax revenue collected to total monthly expenditures given that report, in your opinion?

That is NOT what the headline stated or what you stated earlier.

In any case, the final total receipts and outlays usually differs somewhat from the daily Treasury statement issued on the last day of the month. Therefore, these numbers are just ballpark and may differ from the MTS which comes out later.

Receipts: approximately $213 billion
Outlays: approximately $400 billion

 

[michaelsuede]

Sarcastic jabs are not required.



That is NOT what the headline stated or what you stated earlier.

In any case, the final total receipts and outlays usually differs somewhat from the daily Treasury statement issued on the last day of the month. Therefore, these numbers are just ballpark and may differ from the MTS which comes out later.

Receipts: approximately $213 billion
Outlays: approximately $400 billion

So given your numbers, do you feel this is sustainable and will it lead to long term growth?

In your opinion, what should the Fed and the Congress do to secure economic growth in real (inflation adjusted) terms?

 

[ngc6205]

So given your numbers, do you feel this is sustainable and will it lead to long term growth?

No and No. I never said it was sustainable and I never said it would lead to long-term growth. I was simply pointing out that the title of the article was misleading and exaggerated the reality.

In your opinion, what should the Fed and the Congress do to secure economic growth in real (inflation adjusted) terms?

Unfortunately, I personally do not see any easy fix to the economic and fiscal situation. If it were up to me, I want the government to commit to a long-term balance of the budget along with a gradual pay down of the total outstanding debt. I believe that total outstanding debt should be no more than 50% of GDP. That would put the debt level at about $7.4 trillion at current GDP. That would be my maximum level of debt.

As for the Federal Reserve, I wouldn't have initiated QE2. I might have acted to keep the federal funds rate low, but I wouldn't have asked for additional OMOs. The problem the Federal Reserve has is that economic growth is not expanding at the rate expected with the amount of additional money supply. Some of this is expected due to certain economic factors and how the public opinion or attitudes. The Federal Reserve is in a kind of "lead a horse to water, but you can't make him drink" position. Money supply expansion is supposed to ease the credit crunch and help businesses obtain financing to fund expansion. However, the credit markets are still tight and businesses have postponed or canceled some expansion plans. Until banks and businesses stop being so skittish, the economy will only grow slowly.

Getting back to Congress, the main thing they need to do is to cut spending. Unfortunately, with entitlements, pet projects, and special interests, spending cannot be cut enough. Also, cutting government spending has a tendency to slow down an economy, especially if the spending cut is about $1 trillion. Unfortunately, it needs to be done.

Congress also needs to increase tax revenue, which can be done through a small increase in individual income tax rates. While it would affect me, I believe that only the top two income tax brackets should be increased. I also believe that Congress should increase the income cutoff for Social Security taxes. Also, to increase corporate tax revenue, Congress should DECREASE the corporate tax rate. Instead of global corporations shifting profits to lower tax countries, they might start shifting some of those profits back to the U.S. which would then actually INCREASE tax revenue.

As I mentioned, there is no quick or easy fix. For the long-term health of the economy, I believe that it is most important for the government to control spending. I think it needs to be done now. I know that it would have a detrimental effect in the near-term. However, I believe the amount it would hurt now would be less than the tough choices that will have to be made in the future.

 

[michaelsuede]

Yeah, I agree in general with what you are saying, but I'm looking specifically at the "why"

You're saying spending should be cut, but not explicitly stating why spending cuts lead to more economic growth.

The answer to "why" spending cuts lead to economic growth is the important part in all of this.

If one follows the logic to its roots, eventually one finds the entire governmental apparatus is unnecessary and a drag on the economy.

There is no magic cut off point where suddenly government is so small that the economy slows down. Everything can be privatized.