You Know the Gov't is Hard up For Money When...

[Chef Jim]

....you mail your check for your taxes on the 13th and it clears the bank on the 15th.

[Magox]

I read this yesterday on Bloomberg

 

 

 

Soaring U.S. Budget Deficit Will Mean Billions in Bond Sales

By Michael McKee

 

April 22 (Bloomberg) -- Millions of lost jobs mean billions in lost tax revenue for the U.S. government, and billions in additional Treasury debt to fund a federal budget deficit that may soar to more than four times last year’s record $454.7 billion.

Employers cut 3.7 million positions from their payrolls in the six months since the fiscal year began Oct. 1, and the unemployment rate reached a 25-year high of 8.5 percent in March. That suggests receipts for April -- the biggest month for tax collection -- are likely to come in well below April 2008, analysts said. With spending on unemployment insurance and other safety- net programs rising, the deficit is already at a record $956.8 billion six months into the fiscal year. To help close that gap, the Treasury Department has more than quadrupled borrowing, pushing the government deeper into debt.

 

“Tax receipts are just collapsing,” said Chris Ahrens, head of interest-rate strategy at UBS Securities LLC in Stamford, Connecticut, one of 16 primary dealers required to bid at Treasury auctions. The need to sell more debt “is a big issue in the Treasury market and it is ongoing. The surging budget deficit is the primary cause.”

 

The government will have to sell $2.4 trillion in new bills, notes and bonds in fiscal 2009, according to UBS. From October through December, the Treasury sold a record $569 billion, up from $82 billion in the same period a year earlier, and auctioned another $493 billion in the last quarter, up from $156 billion. That helps to make up for the drop in tax receipts, pay for the rise in spending and refinance maturing debt. Along with the principal, the sales add additional interest costs to the deficit for years to come.

 

Unemployment Benefits

 

At the same time, government spending has climbed 33 percent in the fiscal year through March, as relief programs such as unemployment benefits expand. Labor Department expenditures have more than doubled to $52.7 billion and payments by the Department of Health and Human Services have risen by $40.6 billion, or 12 percent. Spending by the Agriculture Department, which runs the food-stamp program, is 18 percent higher, or $9.9 billion more than in the same period a year ago.

 

These increases will contribute to a record federal budget deficit this fiscal year. On March 20, the Congressional Budget Office forecast the shortfall will reach $1.85 trillion, dwarfing the previous peak. UBS estimates a budget deficit of $1.65 trillion, Ahrens said.

 

Plummeting Receipts

 

Rising unemployment and lower consumer spending helped drag income-tax receipts from individuals and small businesses down 15 percent in fiscal 2009 through March, compared with a year earlier. Data due in May will likely show that the recession curbed estimated-tax payments in the first quarter, while the drop in financial markets caused capital gains to shrink.

 

With the tax cuts from President Barack Obama’s stimulus package also taking effect in April, “that combination is going to give you weak tax revenues,” said Douglas Lee, chief economist at Economics From Washington, an independent consulting firm in Potomac, Maryland.

 

From the start of the fiscal year through March, personal income-tax payments fell to $429.7 billion from $503.5 billion in the year-earlier period, according to Treasury budget statistics. That’s the first such drop since 2003, according to department records.

 

“There’s been a huge hit, not just to income but to wealth,” said Ethan Harris, co-head of U.S. economic research at Barclays Capital Inc. in New York. “The economy did not turn in the first quarter of the year.” The numbers “are worse than most of us would have expected coming into the tax season.”

 

Lower Earnings, Higher Refunds

 

The federal government is also losing revenue from corporate tax receipts, which have fallen 57 percent from the first six months of fiscal 2008. Not only are companies earning less -- and paying less in taxes -- they are getting more in refunds.

 

Obama’s economic-stimulus package included a provision allowing small businesses with losses in 2008 to carry back those losses for five years rather than two, so companies can claim refunds against taxes paid in the past. Business refunds in January through March of this year were $40.4 billion, almost double the $22.3 billion of a year ago.

 

Personal income-tax refunds are also higher than last year, up 11 percent to $207.8 billion. That may be because people who pay estimated quarterly taxes based their estimates on 2007 earnings, and overpaid as the economy collapsed in 2008, Lee said.

 

Close the Gap

 

States and cities are also being hit hard by unemployment’s effect on tax revenue. The 23,300 Wall Street jobs that disappeared in the year through February helped blow a $16 billion hole in New York state’s budget. State officials are trying to close the gap by raising taxes, which will likely restrain spending and slow recovery.

 

The attack on bonuses led by members of Congress also hurts. As payments are scaled back or eliminated, tax revenue falls. It’s not just a problem for New York: Individual tax receipts were 4.5 percent less than forecast in Minnesota during February and March.

 

“While lower-than-expected withholding-tax receipts are always a matter of concern, this shortfall appears to be due to lower-than-projected bonus payments,” the Minnesota Management and Budget office said in its April Economic Update.

 

At the federal level, concern over the budget deficit extends beyond this year’s “disaster,” Harris said. Social Security and Medicare costs are also rising as baby boomers age, and the Obama administration has a number of new programs beyond stimulus -- including revamping health care -- that it wants to spend money on.

 

“It’s going to be a structural issue,” Harris said. “You have a Congress that’s lost its fear of deficits, so it’s still going to be hard to turn the deficit around once the economy and tax receipts have recovered.”

[VABills]

“It’s going to be a structural issue,” Harris said. “You have a Congress that’s lost its fear of deficits, so it’s still going to be hard to turn the deficit around once the economy and tax receipts have recovered.”

 

Time for a tea party

[Lt. Dan's Revenge]

Wow. That Bloomberg article is depressing.

[erynthered]

No worries. Lets just print more money!! Hell, China will never stop buying our debt.

 

Its a win win situation.

[Magox]

Two ways to cut the defecit:

 

1) Cut spending

 

2) Generate more revenue (higher taxes)

 

 

 

Well, we know that in the next 5 years or so that we will not be cutting spending. So there goes that option.

 

Generate more revenues? That is going to be very difficult to do. We may be nearing a bottom from an economic crisis stand point. But what people I believe are failing to do, is scaling back their expectations of how this country is going to look like after we hit the bottom.

 

It will be very difficult to raise taxes and not to mention politically very unpopular, when growth is at anemic levels. Not to mention all this dollar printing we are doing is going to cause some serious inflation down the road. This inflation is going to serve as another very painful tax that every one will have to pay, not just us as consumers, but also at a corporate level, which in turn affects the companies bottom line, which in turn makes it very difficult for companies to grow, which in turn means not as many jobs to be had.

 

massive inflation is going to be a direct result of massive deflation, like the one we are experiencing, in my view inflation is going to end up being the canary in the coal mine.

 

Here's another interesting article from today, quoting opinions from a man I respect very much named Martin Feldstein:

 

Harvard’s Feldstein Sees U.S. Inflation Danger After 2010

 

By Vincent Del Giudice and Thomas R. Keene

 

April 23 (Bloomberg) -- Harvard University economics Professor Martin Feldstein said inflation will emerge as a threat to the economy after a sustained recovery develops next year.

 

“In the next few years inflation is going to be the bigger problem” than deflation, or widespread declines in consumer prices, Feldstein said in an interview with Bloomberg Radio. He also said “we’re not going to see a sustained turnaround in the economy until next year.”

 

Feldstein, a former head of the National Bureau of Economic Research and adviser to President Ronald Reagan, warned that the Federal Reserve will have a challenge in heading off inflation because of how it’s conducted monetary policy during the crisis.

 

Instead of expanding the central bank’s balance sheet by purchasing easy-to-sell Treasuries, the Fed has snapped up mortgage securities that are likely to be tougher to use as a tool to soak up cash, Feldstein said.

 

In an earlier interview with Bloomberg Television, Feldstein said he didn’t anticipate a lending boom from banks judged to have passed U.S. regulators’ stress tests on their balance sheets. Results from the reviews are scheduled for release May 4.

[bills_fan]

Harvard University economics Professor Martin Feldstein said inflation will emerge as a threat to the economy after a sustained recovery develops next year.

 

Sorry Martin, ain't no recovery coming next year.

 

Don't have to worry at all about inflation.

 

This chart tells me that there won't be a recovery til...oh about 2012 or 2013. See we got this stuff called Option ARMs, thatw ere real big from 2004 through 2007, they had low initial payments and then reset after 5 years into much higher payments. People figured they could just sell or refi their house before the payments reset. Problem is that houses are not selling and refis require appraisals. Ooops.

[stuckincincy]

....you mail your check for your taxes on the 13th and it clears the bank on the 15th.

 

Impressive - given the volume. That's up there with 1040ES check-cashing speed...

[GoodBye]

....you mail your check for your taxes on the 13th and it clears the bank on the 15th.

So if they have received your check, why haven't I received my refund from them yet?

[Magox]

Sorry Martin, ain't no recovery coming next year.

 

Don't have to worry at all about inflation.

 

This chart tells me that there won't be a recovery til...oh about 2012 or 2013. See we got this stuff called Option ARMs, thatw ere real big from 2004 through 2007, they had low initial payments and then reset after 5 years into much higher payments. People figured they could just sell or refi their house before the payments reset. Problem is that houses are not selling and refis require appraisals. Ooops.

Oh ya. I saw that about a week or two ago. There is no doubt that we face some stiff headwinds moving forward. That's not even the worst part about it bills_fan. The next shoe to drop is the credit card defaults and commercial real estate market.

 

As a result of all this, the government will do everything in their power (printing money) to fight off this deflationary whirlwind that we are in. If you print enough money my friend, some of it will stick.

 

Don't get me wrong, I don't believe that we will have a healthy inflationary uptick, I believe it will be the bad kind of inflation. One that isn't some much produced by healthy demand for products, goods, services and commodities, but one that is strictly monetary based.

 

If the value of the US dollar plummets, then what you will see is a mad rush for physical raw materials. Investors will be purchasing these commodities to hedge themselves against a flailing dollar.

 

I am also on the camp that doesn't believe there will be an immediate inflationary impact from all this massive money printing, unless the dollar plummets sooner than expected. But it's coming, the question is when?

[stuckincincy]

So if they have received your check, why haven't I received my refund from them yet?

 

In a bold and courageous move, Pres. Obama directed 15 Cabinet heads to cut $100 million. That's 0.0029 percent of the 3.5 trillion dollar budget - 13 minutes of Federal spending.

 

Your return $ was in that, so you have to wait. Happy Birthday! and thanks for doing your part.

[/dev/null]

In a bold and courageous move, Pres. Obama directed 15 Cabinet heads to cut $100 million. That's 0.0029 percent of the 3.5 trillion dollar budget - 13 minutes of Federal spending.

 

Wow, I guess Obama really did deliver on the change we really needed to believe in

[VABills]

So if they have received your check, why haven't I received my refund from them yet?

Obama is sending out IOU's like California. He was trying to copy good ideas from that "republican" governer.

[bills_fan]

Oh ya. I saw that about a week or two ago. There is no doubt that we face some stiff headwinds moving forward. That's not even the worst part about it bills_fan. The next shoe to drop is the credit card defaults and commercial real estate market.

 

As a result of all this, the government will do everything in their power (printing money) to fight off this deflationary whirlwind that we are in. If you print enough money my friend, some of it will stick.

 

Don't get me wrong, I don't believe that we will have a healthy inflationary uptick, I believe it will be the bad kind of inflation. One that isn't some much produced by healthy demand for products, goods, services and commodities, but one that is strictly monetary based.

 

If the value of the US dollar plummets, then what you will see is a mad rush for physical raw materials. Investors will be purchasing these commodities to hedge themselves against a flailing dollar.

 

I am also on the camp that doesn't believe there will be an immediate inflationary impact from all this massive money printing, unless the dollar plummets sooner than expected. But it's coming, the question is when?

 

 

IMHO, Inflation = an increase in the amount of physical money and credit chasing the same amount of goods and services. The Fed can print all of the cash they want, doesn't matter when credit (consumer, business etc.) is being destroyed at 2xs the rate. Also, there is very little of the "chasing" going on right now, no velocity of money.

 

Deflation is the order of the day and will be for quite some time. I don't think we will see an inflationary problem for a long time.

[IDBillzFan]

....you mail your check for your taxes on the 13th and it clears the bank on the 15th.

When my accountant sent me my paperwork, he called me to say "Make sure you transfer the funds to cover your check when you mail it because all they're doing is ripping open returns, taking checks and pulling funds so fast your head will spin."

 

It dawned on me to send them an IOU. I mean, if the Secretary Treasurer doesn't have to be held accountable for not paying his taxes, surely I can send an IOU, right?

[Chef Jim]

When my accountant sent me my paperwork, he called me to say "Make sure you transfer the funds to cover your check when you mail it because all they're doing is ripping open returns, taking checks and pulling funds so fast your head will spin."

 

It dawned on me to send them an IOU. I mean, if the Secretary Treasurer doesn't have to be held accountable for not paying his taxes, surely I can send an IOU, right?

 

I'm just glad I was proactive enough to transfer the funds the week prior seeing it took a few days to get from my money market to my checking.

[DC Tom]

Sorry Martin, ain't no recovery coming next year.

 

Don't have to worry at all about inflation.

 

This chart tells me that there won't be a recovery til...oh about 2012 or 2013. See we got this stuff called Option ARMs, thatw ere real big from 2004 through 2007, they had low initial payments and then reset after 5 years into much higher payments. People figured they could just sell or refi their house before the payments reset. Problem is that houses are not selling and refis require appraisals. Ooops.

 

I knew (from my now-former job and my wife's job) that the bad mortgages wouldn't be completely written off until '12 or so...but to see it in chart form like that... That is a seriously ugly chart.

 

Doesn't bode well for a balanced federal budget, either. There's going to be a hell of a lot of government borrowing to cover that mess.

[GoodBye]

In a bold and courageous move, Pres. Obama directed 15 Cabinet heads to cut $100 million. That's 0.0029 percent of the 3.5 trillion dollar budget - 13 minutes of Federal spending.

 

Your return $ was in that, so you have to wait. Happy Birthday! and thanks for doing your part.

Yeah, yeah...i know.

[stuckincincy]

Yeah, yeah...i know.

 

When it does arrive, may I recommend a weekend bucket of KFC fried chicken with the potatoes and gravy and slaw and biscuits? Water to wash it down, then slosh through a big bottle of whatever cheap Dago Red to give a glow.

 

I'm a fan of the now-and-then sat-fat, salty bomb meal followed by a great slug of booze with time set aside for the throne.

 

So much angst going on this day. Splurge!!!

[bills_fan]

I knew (from my now-former job and my wife's job) that the bad mortgages wouldn't be completely written off until '12 or so...but to see it in chart form like that... That is a seriously ugly chart.

 

Doesn't bode well for a balanced federal budget, either. There's going to be a hell of a lot of government borrowing to cover that mess.

 

 

I completely agree. I read another interesting piece concerning how a state like MD may clear quicker than others because of their laws regarding tax liens. This piece explains the process a bit, I have to say I'm a bit intrigued.