Security, Social Security and Medicare -Can They Exist in a Balanced Budget?
(6/23/17)- Treasury Secretary Steven Mnuchen told CNBC and Bloomberg TV in interviews that the government can continue to pay its bill through September, even though the debt ceiling was reached in mid--March.
Government revenues have been coming in less than expected for the last few months as tax code revisions by the Trump administration continue to be under a cloud of uncertainty. The Senate may vote on the Republican replacement for the Affordable Care Act next week, but then will recess for a 5 week summer break, so it is unlikely that any action will take place on raising the debt ceiling until late September/
(5/12/17)- The U.S. ran a budget surplus in April of about $182 billion, according to the Treasury Department, which was $76 billion greater than the surplus in April 2016. Part of this surplus was due to a calendar quirk and the timing of certain transactions.
Declining federal revenues and increasing federal obligations will result in an increasing federal deficit in the coming years.
(5/6/17)- With 79 senators voting in favor of the budget measure that had been approved by the House, the Senate sent the measure on to President Trump, who a spokesman said, would sign it before the 12 :01 a.m. deadline Saturday.
The measure increases military spending by $19.9 billion over the fiscal year 2016 enacted level. The money for the defense spending comes from emergency funds. Planned Parenthood Federation of America funding will continue through this fiscal year.
(5/5/17)- The House of Representatives passed the $1.1 trillion budget bill on Wednesday that provides the funding for the federal government for its fiscal 2016-2017 spending. The vote was 309 to 118, and the Senate is expected to pass the bill, and in turn send it on to the president, who indicated that he would sign it.
The bill covers the federal spending through September 30, 2017, at which time a new budget for fiscal 2017-2018 must be enacted..
(4/29/17)- Congress has passed, and the president has signed a bill that extended funding for the government through May 5. Included in the bill was a provision to extend health-care federal benefits for coal miners through May 5.
Please keep in mind that the budget that Congress is working on is for the federal government’s fiscal year that began on October 1, 2016.
(4/24/17)- With the Senate having reconvened on Monday, and the House on Tuesday, all eyes are on April 28 deadline for passage of the budget, but there is still a delaying tactic available to the legislators to push things even further into the future.
As they have done recently, Congress could pass another “continuing resolution”, which would keep spending at present levels until another date is set for some time down the road. Please keep in mind that the federal government’s fiscal year began on October 1, 2016, and ends on September 30, 2017.
(3/30/17)- The days are dwindling down between now and April 28th when the last continuing resolution is due to expire. That leaves only 10 legislative workdays to come to an agreement on the budget, or the government will be faced with a partial shutdown. Looming on the horizon is the issue of increasing the national debt limit, so that the federal government can pay its bills as they come due.
Congress agreed in 2015 to overall spending levels of the two-year budget deal that expires in October.
For more info on these matter4s, please see our item dated 2/20/17 below.
(3/17/17)- As we noted in our item dated 2/20/17 below, continuing resolutions have been used by Congress to keep the federal government funded through April 28. The continuing resolution route is costly and has been used now for 16-months, when in fact it has served to delay resolution of some sensitive budgetary problems.
The U.S. Treasury Department will begin employing emergency cash management steps this week to avoid breaking that debt limit, which currently stands at $18.1 trillion, the amount it was at before Congress started passing continuing resolutions in November 2015.
That will allow the Treasury to pay its debts, as they come due, while cutting back on the issuance of new debt obligations. Please keep in mind that interest rates have been rising since July 2016, and officials from the fed have been predicting at least 2 more increases in the fed fund rate this year. That will make it more costly for the Treasury to raise money through the issuance of bills, notes and bonds.
When Barack Obama was president, the Republicans opposed increasing the debt ceiling without cutting back on spending, and the Democrats favored increased spending. Now, with the Republicans and President Donald Trump being in the majority, both parties have reversed how they stand on the issue.
(2/20/17)- As noted in our item dated 12/11/16 below, the continuing resolution that was passed by both houses of Congress, and signed by the then President Obama keeps the government funded through April 28. The Trump administration is expected to make a supplemental request before that date for money to go to the military.
Under the Budget Control Act of 2011, spending on defense and domestic programs is capped at 2011 levels. If the request is made to lift the cap for military spending, the Democrats are then expected to make their request to lift domestic spending by that same percentage.
Former Representative Mick Mulvaney who was recently confirmed as the new budget director, is known as a fiscal conservative. The New York Times obtained a memo from the Office of Management and Budget (OMB) that calls for the elimination of funding for nine federal programs.
Most of the programs each cost less than $500 million annually, which are minimal amounts when you consider the fact that total projected federal spending will run about $4 trillion this year
The programs listed in the memo include the Corporation for Public Broadcasting; the Legal Services Corp.; Americorps; the National Endowment for the Arts and Humanities (NEA); the Export-Import Bank; and the Office of National Drug Policy.
The total savings from eliminating the 9 programs would come to about $2.5 billion.
(2/9/17)- The latest figures from the National Association of State Budget Offices showed that revenue came in below forecast in 25 states, which is the most states with revenue shortfalls since the last recession.
At least 24 of those states face revenue forecasts with shortfalls for their 2017 fiscal year forecasts’
Four states- Arkansas, Maine, New Hampshire and North Carolina- were running ahead of predictions.
(2/2/17)- The nonpartisan Congressional Budget Office (CBO) now projects that the federal deficit will grow by over $10 trillion in the next 10 years. The deficit is expected to shrink both this fiscal year and next for the federal government, but will start to grow again in 2019. By 2021 the deficit is expected to exceed the $1 trillion level, which it was at in the first few years of the Obama administration.
Last year the deficit was $587 billion, up from $438 billion the prior fiscal year.
(12/11/16)- The Senate approved a continuing resolution on December 9th, that was previously passed by the House that will keep the government funded through-April.28, 2017 President Barack Obama signed the measure.
Democratic Senator Joe Manchin III of West Virginia had opposed the resolution, since it failed to provide health-care coverage for miners past that mid-April time period, when he had hoped for the coverage to last for a year. Republican Senator Shelley Moore Capito, the other senator from West Virginia sided with Sen. Manchin on this issue.
(10/17/16)- The numbers are in, and for the first time in 7 years there is an increase in the budget deficit for the federal government for its fiscal year ended September 30, 2016. The deficit came to $587 billion, up from $438 billion for the 2015 fiscal year.
Treasury Secretary John J. Lew and the budget director, Shaun Donovan jointly announced the figures for the budget, which showed increases in spending for veterans’ benefits payments, Medicare and Medicaid and interest payments on the national debt.
Military spending stayed at about the same level, while spending for food stamps showed a decrease of 4%
The deficit for 2016 was equal to 3.2% of the gross domestic product (GDP) up from 2.5% of the GDP in 2015. The deficit problem is expected to continue to worsen in the coming years unless Congress comes to grips with the Medicare and Social Security issues as the population lives longer and the ratio of active workers compared to the number of Social Security recipients continues to decline.
(10/1/16)- Congress did pass a stop-gap continuing resolution that will keep the government from shutting down at the end of the day on Friday, September 30th. The bill was first passed in the Senate by a 72 to 26 vote, and then in the House by a 342 to 85 tally.
A conference meeting to resolve the differences in the bill as passed by the Senate and the House is not expected to happen until after the election, when the lame duck Congress will be in session.
In addition to keeping the government running at current levels, it also provides $1.1 billion to fight the Zika virus with no restrictions on funds going to the Planned Parenthood ProFamilia clinics in Puerto Rico.
Flooding aid for states affected by the recent floods was included in the bill but aid for the Flint water crisis will be brought up as part of the Resource Development Act which would be amended to authorize $170 million in spending to communities, such as Flint Michigan, where the president has declared a state of emergency because of water contamination.
The bill also includes spending for military infrastructure, housing and other services.
(9/25/16)- September 30th closes the books for the government’s fiscal year, but it looks like Congress will go down to the wire as far as agreement being reached on the 2016-2017 budget.
Both the Republicans and the Democrats reached an agreement on $1.1 billion in funding to combat the Zika virus as part of a stopgap spending bill needed to keep the government running beyond next Friday, but spending for a Flint, Michigan water bill seems to be the blocking point now.
The Democrats object to the fact that the stopgap spending measure introduced by Senate Majority Leader Mitch McConnell (R., Ky.) that included flood relief for certain states did not address the drinking water crisis in Flint., Mich.
The Zika funding deal removed restrictions that would have prevented ProFamilias clinics in Puerto Rico, which work with Planned Parenthood from accessing the funding.
The Senate is expected to take its next procedural vote on the spending bill on Tuesday.The House is expected to consider the spending bill once it has passed the Senate.
(8/25/16)- Even the experts have difficulty in trying to predict the direction and how far interest rates will move within a year’s period of time. This degree of difficulty came to the forefront when the Congressional Budget Office announced in its latest estimate of the prediction that it made this January for the yield, on average, this year for the 10-year U.S. Treasury bond.
The revised estimate called for this year’s average yield to be 1.8%, down from their January estimate of 2.8%, and for next year’s average of that bond to be 2.3%, down from its previous estimate of 3.5%. The CBO also projected that the lower interest rates will result in $1.1 trillion in lower spending for the decade.
Higher yielding U.S. Treasury obligations will be issued at lower interest rates than other maturing obligations The CBO also projected that the deficit for the federal government for its fiscal year will come in at $549 billion, or 3% of the Gross Domestic Product, up from $500 billion, which was 2.7% of the GDP that it predicted earlier this year
As a matter of fact the majority of governors on the Federal Open Market Committee predicted in January that they would increase interest rates 4 times this year. While in fact there has been only one increase as of today.
(8/12/16)- The federal deficit for the last 12 months totaled $487 billion, down 0.03% from a year earlier, according to the latest figures from the U.S. Treasury Department.
Corporate tax revenue declined in the past year, while individual and payroll tax revenue have been on the upswing, thanks to steady payroll growth.
In the 12-months through July, the deficit represented 2.6% of the nation’s economic output, or gross domestic product (GDP). That was down from 2.8% of the GDP in the 12 months through June.
(7/21/16)- In its latest monthly budget report, the U.S. Treasury department said the deficit through June was $401 billion, up 27% from the same period a year ago.
Total receipts for the federal government was up 1%, while spending increased 4%.
The Congressional Budget Office (CBO) projects a deficit of $534 billion for the federal government’s fiscal year, which is up about $100 billion from its last fiscal year deficit.
(6/13/16)-Federal spending exceeded revenues by $53billion in May, according to the latest figures from the U.S. Treasury Department, increasing the deficit to $479 billion over the past year. That is up 16% from the prior year.
Revenues over the past year grew by 3%, compared to the numbers from the prior year, through May 2015. Government spending grew by 4.6%, compared with the previous 12 months.
(4/16/16)- The federal deficit for its fiscal year from October through March increased by almost 5% from the same period last year. The deficit for the month of March was $108 billion, up from $53 billion in March 2015.
The Congressional Budget Office (CBO) projects a $534 billion deficit for this fiscal year.
(3/12/16)- The federal deficit in February came in at $192.6 billion, up 0.1% from a year ago, as announced by the Department of the Treasury. The total deficit stands at $353 billion for the federal fiscal year which began on October 1, 2015, down 8.7% from the same period in the prior year’s budget.
That improvement is not expected to last. The Congressional Budget Office (CBO) expects the deficit to climb by 24%, to $544 billion. Last fiscal year the federal deficit fell to an 8 year low at $439.1 billion. Obama administration officials estimate that the deficit will be about $616 billion.
(2/12/16)- The federal government recorded a budget surplus in the month of January of $55.2 billion, bringing the 4 month total for its fiscal year to a deficit of $160.4 billion, down from the $194.2 billion deficit recorded for the first 4 months of the 2015 fiscal year.
The monthly surplus was aided by the fact that some benefit payments took place in December instead of January.
(1/24/16)- The federal budget deficit for the fiscal year ending September 30, 2016 is projected to be $544 billion by the Congressional Budget Office (CBO).This is up by $130 billion from the projection that the CBO. made in August 2015. The agency projected that the cumulative deficit over the next 10 years would be $1.5 trillion higher than its earlier estimate.
The projection was that the deficit would become more than 3% of the GDP by the year 2018. That is the top limit that economists generally consider sustainable in a growing economy. The deficit is expected to grow to 2.9% of the GDP by 2017.
(1/16/16)- The U.S. budget deficit ended the 2015 calendar year at its lowest level since 2009, although the federal government operates on a fiscal year basis which ends on September 30. The deficit was $478 billion, or around 2.6% of gross domestic product (GDP). This was the 6th straight year of deficit declines.
The deficit for the 2014 calendar year was $488 billion, or 2.8% of GDP, according to figures released by the Treasury Department.
Spending last year rose 5%, while revenues rose 6% in 2014
(12/19/15)- Faced with the inability to negotiate the final terms of the $1.1 trillion spending bill, another Continuing Resolution had to be passed by Congress extending the deadline from December 16 to December 22.
The negotiated spending measure, which contains 2,009 pages, was passed at 1:34 a.m. Tuesday morning. missing a midnight deadline that House leader Paul Ryan had set. Under the new procedure set up by the Republicans, legislators have 3 days to view the new measure before it can be voted on.
This meant that Friday, December the 18th would be the earliest date that it could be passed. The House did vote Friday (308-109) for passage of the spending bill, and the Senate voted shortly thereafter to pass the measure. President Obama, in turn signed it, so it was all done in one day.
Spending will increase by $66 billion for 2016, and an array of tax benefits were made permanent at a cost of more than half-trillion dollars to the deficit It includes a provision to end the 40-year ban on the exportation of crude oil from the U.S., as well as a large increase in funds for medical research at the National Institutes of Health that received bipartisan support.
It also reauthorizes and extends federal aid for emergency workers suffering from health issues related to the Sept. 11 terrorist attacks in New York City. Teachers will be able to deduct their expenses for items that they purchase on their own for their students.
The “Cadillac” tax in connection with health insurance plans will be postponed for 2 years. The increased tax on medical devices was eliminated.
(12/14/15) Congress approved and President Obama signed a stop-gap measure that will prevent the government from shutting down for an additional 5 days until Dec.16.
The House had approved the bill by a voice vote on Friday afternoon, while the Senate had approved the patch on Thursday. Congress is set to adjourn on December 18, but in all likelihood the $1.15 trillion spending bill for fiscal 2016 will be passed by then.
Lawmakers agreed to the bill’s overall funding level as part of a two-year budget deal back in October.
The federal deficit widened in November, driven by higher spending on Social Security, Medicare and defense. The Treasury Department said the November deficit climbed to $64.6 billion, up 13.6% from a year ago.
For the first two months of the federal government’s fiscal year, the deficit totals $201.1 billion, up 12.6% from a year ago. Social Security spending increased by 4%, while Medicare spending grew by 9%.. Total receipts are up by 2.9% to $416 billion for the first 2 months of the fed’s fiscal year, but spending is up 5.9% to $617.1 billion.
(12/6/15)- The five-year $395 billion highway measure that we wrote about in our item dated 12/3/15 below cleared the Senate 83-16 after a 359-65 vote in the House on Thursday. President Obama is expected to sign the bill.
About $207.4 billion would be devoted to highway projects, with an additional $48.7 billion reserved for mass transit. Some of the funding would go towards the construction of a rail freight tunnel in New York Harbor. About $8 billion would go for funding to Amtrak.
Funding for the bill would come from selling oil from the Strategic Petroleum Reserve, and $10 billion from the Federal Reserve’s rainy day fund. The crop-insurance subsidy will be cut, and private debt collectors would be hired to collect unpaid taxes.
The national Highway Traffic Safety Administration funding would be increased by about $1 billion. The bill also includes a provision for continued funding of the Export-ImportBank.
(12/3/15)- Congressional negotiators agreed on a $305 billion measure to extend the funding for the Highway Trust Fund for 5 years. The chief negotiators were Rep. Bill Shuster (R-Pa.) who heads the House Transportation and Infrastructure Committee; Rep. Peter A. Defazio of Oregon, the panels senior Democrat; Sen. James M. Inhofe, (R-Okla.) who leads the Senate Environment and Public Works Committee; and Senator Barbara Boxer of California, the committee’s senior Democrat.
The bill is called the Fixing America’s Surface Transportation (FAST) bill. Some of the money for the funding will come from the Federal Reserve. The bill cuts the Fed’s annual dividend payments to large commercial banks from its current 6% to 1.5%.
The bill also requires the Fed to pay out $19 billion from its rainy day fund from its current $29 billion amount. It also increases by 5% current funding for highway construction in every state. Local transit systems would receive an 8% increase. The federal gas tax would remain at 18.4 cents per gallon, as noted in out item dated 11/12/15 below.
(11/15/15)- The federal deficit for October, which is the first month for its fiscal year, showed an increase over October 2014, although much of that was due to a statistical quirk. The Treasury Department said the October deficit totaled $136.5 billion, up 12.2% from October 2014.
In both years, November 1 fell on a weekend, which required the government to mail out the benefit checks in October.
That shifted $49 billion in payments into October, up from $41 billion in payments last year.
The federal deficit for the fiscal year ended September 30, 2015 fell to $438.9 billion, its lowest level in 8 years. The Congressional Budget Office estimated that the 2016 fiscal year deficit would drop to $414 billion.
(11/12/15)- With the passage of a 2-year budget agreement by Congress, which measure has been signed by the president, legislators now turn to their next major deadline issue, namely extension of the Highway Trust Fund, where funding is due to expire on November 23rd.
That fund, which pays the federal share for infrastructural work throughout the country, is financed largely by a tax on gasoline, which is currently set at 18.3 cents a gallon. That tax was never indexed for inflation, nor for the fact that cars today get many more miles-per-gallon than did autos years ago, leaving the fund short by $53 billion since 2008.
Congress has made up the shortage in past years by taking money from the general fund, but existing law calls for that tax to be cut to 4.3 cents per gallon next year. The 18.3 cents tax level was set by Congress in 1993, and if it were indexed for inflation, it would now be at 30 cents-per-gallon.
The stalemate over how to finance the highway fund led legislators to draw up a bill that includes 6 years of policy, but only 3 years of financing. Over 300 amendments have been added to the bill, with many in Congress adamant in opposing any increase in the fuel tax.
(11/3/15)- The Senate voted 64 to 35 to pass the budget measure adopted by the House that set the spending limits for the next two years, and increased the debt ceiling. President Obama said he would sign the bill. 18 Senate Republicans joined with all the Democrats there, while all 35 no votes came from Republican Senators
It will now be up to the legislative branch of the government to break down the exact amount of who gets what into the 12 individual expenditure items that define that process.
(10/29/15)- President Obama vetoed legislation authorizing $612 in military spending for the federal government’s spending for its coming fiscal year. This was the 5th time he had used the executive veto power during his presidency.
The president made a public television appearance for his veto of the National Defense Authorization Act. He criticized the bill for adding extra money to a supplemental war fund, known as the Overseas Contingency Operations, which isn’t subject to the budget caps. The bill authorized $89.2 in supplemental war funding, but it made no allowance for any increase in domestic spending..
(10/23/15)- The Treasury Department and the Office of Management and Budget said that the federal deficit had fallen to $439 billion, in the federal government’s 2015 fiscal year ending September 30, 2015. That deficit represents 2.5% of the economy, the lowest percentage since 2007. The recent high-point for the deficit was 2009, when it reached $1.4 trillion.
Receipts grew by 8% for the fiscal year 2015, but the Congressional Office projected that deficits would start to grow again in 2017.
Treasury Secretary Jacob Lew said that the emergency measure that the department had undertaken in order not to exceed the ceiling of $18.1 trillion would carry the government only until November 3.
(10/9/15)- The Senate voted 70-27 to pass a $612 billion defense spending bill that President Obama has vowed to veto. The House voted 269-151 last week to approve that bill.
President Obama said he would veto the bill because it contains the $38 billion for the “off budget” war effort, while not increasing any funding for any domestic social programs. This would be the fifth time a president has vetoed a defense spending bill in the last half-century. Please see our item on 9/19/15 below for more on this matter.
At the same time, the clock is ticking on the deadline for funding for the Highway Trust Fund which expires on October 29.
(10/5/15)- Congress did pass, and President Obama did sign a “continuing resolution” on September 30th, so that December 11th now looms as the deadline for keeping the government funded. President Obama vowed that this would be the last time he would sign this type of device that keeps the federal government running, while at the same time not coming up with a definitive budget
The resolution keeps funding capped at limits agreed to in 2011, but allows discretionary spending to rise 0.2% in fiscal 2016. The government spends about of about $1,017 trillion a year, with some changes for emergency spending, such as $700 million to fight the forest fires in the west.
The House vote was 257 to 151, with 186 Democrats and 91 Republicans voting in favor. All of the “no” votes were Republicans.
Treasury Secretary Jacob Lew said in a letter to Republican House Speaker John Boehner that the government would be left with just $30 billion on or around November 5. The debt ceiling is currently set at $18.1 trillion
Authorization for spending on the highway trust fund expires on October 29.
(9/19/15)- The U. S. government’s fiscal year runs from October 1 through September 30th, and Congress is required to have a budget in place for the coming year so that the government can continue to operate and not be shut down. The budget consists of 12 spending bills covering all federal departments and agencies.
In previous years, if no budget has been passed and signed by the president, Congress has used what is called “Continuing Resolutions (CRs)”, which cap spending for a set short period of time to keep the federal government working. The CR caps spending for all federal departments and agencies at the same level that it was at in the previous year’s budget.
Exceptions are made, so that the $38 billion for contingency funds for the war effort is an “off budget” item. Expenditures for natural disasters are also off budget items
At the same time as the clock is ticking for Congress to pass a budget, it is also clicking over the need to increase the nation’s debt ceiling and replenish the Highway Trust Fund, which finances construction and maintenance of roads and bridges that will run out of money on October 29.
(8/13/15)- The federal deficit for the month of July was $149 billion, which was $55 billion higher than it was in July 2014, according to the latest figures from the U.S. Treasury Department. For the month of July, the federal government spent $375 billion, up $66 billion, or 21%, from last July..
Revenue for July came in at $225 billion, up $11 billion, or 5% from July, last year.
The federal deficit for their fiscal year as of the end of July is $466 billion, compared to $460 billion a year ago. The Congressional Budget Office (CBO) estimated that the deficit federal for its 2015 fiscal year will be around $425 billion, its lowest deficit since 2007.
The federal deficit last year dropped to $483.3 billion from $679.5 billion in 2013. For the four years before 2013 the federal deficit exceeded $1 trillion each year.
(7/17/15)- Obama administration officials now estimate that the U.S. economy will grow by 2% this year, down from their prediction of 3% growth that they made in February. The new estimate came from the White House budget office’s “Mid-Session Review”, which updates the economic and budget projections it made at the beginning of the year.
The economy contracted at a 0.2% seasonally adjusted annual rate in the first quarter
The White House budget office estimated that the budget deficit will fall to $455 billion this year, which is down 22% from its February estimate of $583 billion.
The report sees the unemployment rate falling to 5.1% by year end, and 4.7% by the end of 2016. It expects the consumer price index (CPI) to post an annual increase of 0.2%, down from its earlier forecast of 1.4% gain.
(7/11/15)- The U.S. budget deficit shrank by $52 billion, or 14% during the first 9 months of the 2015 fiscal year, according to the latest figures from the Congressional Budget Office, versus a year ago. Individual income taxes were up $153 billion over a year ago; with a 16% gain in non-withheld receipts that includes payments for stock market gains.
Spending in this period of time increased 5% with military and net interest payments falling.
For the month of June however, the surplus of $50 billion was down $20 billion from June 2014.
(6/30/15)- The yield on the 10-year U. S. Treasury note has risen from 1.93% at the end of March, up to 2.48%, as of Friday, June 26. U.S. Treasury securities overall have posted a negative return of 1.9% this quarter, according to data from Barclays PLC. For the year, the return is minus 0.25%, after a positive return of 5.05% in 2014.
Returns include price gains or losses, plus interest received by a security holder. Investors withdrew $439 million net cash from bond funds and exchange traded funds through June 24, according to Lipper
(6/15/15)- Over the past 12 months, the budget deficit has fallen to $412 billion as of the end of May, from $460 billion in April and $491 billion a year earlier. This is the lowest federal deficit since August 2008. There were 3 years in a row in which the deficit exceeded $1 trillion.
Revenue for the fiscal year which began in October, is running 9% ahead of the year earlier levels, while government spending is up 6%..
Republican lawmakers last month finalized a budget resolution, which doesn’t require presidential approval to keep in place the sequestration limits, but they added over $80 billion in spending through an off-budget war spending account.
(5/26/15)- The House approved a two-month extension for funding highway financing and inter-related infrastructure work over the summer, after years of stopgap measures. The extension was approved by a 387-to-35 vote, and it would maintain funding for the Highway Trust Fund through July 31. The bill now goes to the Senate, facing a May 31 deadline for that legislative body to act before the funding law expires.
(5/15/15)- The U.S. Treasury collected a record $472 billion last month, which helped to result in a $157 billion surplus for the month, up 14% from a year earlier. This month’s surplus was $50 billion more than last year’s, and the fifth widest surplus on record.
This brought the U.S. deficit to $460 billion, from $510 billion in March, and $499 billion in 2014. The deficit is now at its smallest level since last November and the second thinnest since September 2008.
Over the past 12 months, revenue is up 9% since its year-earlier level, while spending has risen 7%.
(5/9/15)- The Senate passed a budget agreement, following its adoption last week by the House, making it the first joint budget resolution to be approved by the Congress since 2009.
The proposal, which outlines deep cuts to eliminate deficits over the coming decade, passed by a 51-48 vote but it is unlikely that the cuts in the proposal will ultimately be passed and adopted. Items such as the $40 billion allocated for the military for fighting the war are considered off-budget items.
(4/9/15)- Republicans in Congress avoided the cap on military spending by moving to put around $40 billion in spending into a war fighting account that does not count against the limit. On the other hand the Senate voted 54 to 46 to fully repeal the federal estate tax.
(2/13/15)- The federal government ran a bigger deficit in January of this year, than it did for the same month in 2014. The monthly deficit was $17.5 billion, compared with $10.3 billion the year before, according to an announcement from the Treasury Department. For the first 4 months of its fiscal year that began October 1, 2014, the deficit widened to $194.2 billion from $182.8 billion during the first 4 months of the prior fiscal year’s deficit.
The deficit has narrowed since 2012, which was the fourth straight year in which it topped $1 trillion. The congressional Budget Office forecast a deficit of $468 billion for the current fiscal year for the federal government, which ends on September 30, 2015.
For the current budget year government revenues totaled $1.08 trillion, up 8.7% from a year ago. Spending is at $1.24 trillion, up 8.3 percent over last year.
(1/22/15)- The U.S. registered its smallest budget deficit last year since 2007, as the country continued to recover from the recession of 2008. Topped off by a $2 billion surplus in December, the government ended the calendar year with a deficit of $488 billion, which was $72 billion less than the deficit at the end of the calendar year in 2013.
The deficit for the fiscal year ended in September was $483 billion, which was the lowest deficit during the Obama administration. The deficit was just under 3% of the GDP, using the most recently available figures for the size of the economy.
(1/16/15)- The federal deficit for the first 3 months of its fiscal year ending December 31, 2014 increased slightly from the same period a year ago, mainly due to the absence of a special payment from Freddie Mac, the mortgage company.
The U.S. Treasury Department announced that the federal government ran a deficit of $176.7 billion for the first three months of this fiscal year, compared to the $172.7 billion deficit a year ago. Last year Freddie Mac paid the federal government $24 billion for the support it received during the federal crisis.
The Congressional Budget Office (CBO) estimated that for the 2015 fiscal year the federal government deficit will fall to $469 billion from $483.3 billion in 2014, or a 3% improvement for the full year.
(12/25/14)- When the Senate passed the $1.1 trillion spending bill, it did so by a 56 to 40 vote, that involved a crossing of party lines in order to keep the government funded through September 30, 2015. The House had approved the bill 2 days earlier.
Republican leaders in both the House and Senate overcame the objections from conservative members of their party, while the Democratic leaders had to outvote the liberals in their party.
The 56 “yes” votes consisted of 31 Democrats, 24 Republicans and one independent.
The House and Senate appropriations committees are working on an omnibus bill that would bundle the 12 individual spending bills at the overall $1.014 trillion annual level set in the bipartisan budget deal reached by Rep. Paul Ryan (R., Wis.) and Sen. Patty Murray (D., Wash.).
(11/6/14)- With the November 4 election behind it, lawmakers will be faced with the government running out of money on December 11, when the current temporary spending bill passed last December expires. Leaders in both parties hope to pass a measure during the lame duck session that will set spending priorities through September 30, 2015, which is the end of the government’s fiscal year.
One of the big questions will be whether the legislators can agree on the 12 individual spending measures that comprise the budget package, or will they “lump sum” the spending in one measure?
(9/4/14)- The Congressional Budget Office (CBO), the independent assessor of government financing trimmed its deficit forecast by $400 billion from its estimate in April for the years through 2024. That cut its estimate of the deficit to $7.2 trillion, with the interest payment estimated for that period now standing at $799 billion by 2024.
The deficit in fiscal year 2014, which ends September 30 now, is at $506 billion, or 2.9% of the gross domestic product.
The CBO expects the deficit to continue to shrink before starting to climb again in 2018 because of an aging population, higher health-care costs and increasing subsidies for certain federal programs. It cut its forecast for the growth domestic product in 2014 to 1.5%, down from its earlier forecast of 3.1%.
The CBO estimated that the unemployment rate would drop to 5.9% at the end of 2014, down from 6.2% in July. Congress agreed to suspend the debt ceiling through mid-March 2015.
(8/15/14)- President Barack Obama signed the $10.8 billion Highway Trust Fund legislation that we discussed in our item dated 8/3/14 below. As we noted in that item, the budgetary gimmick of “pension smoothing” was utilized, so that it was made to appear that the funding for the bill was done properly.
Under “pension smoothing” companies can delay making mandatory pension contributions, but because these payments are tax-deductible, some businesses will pay slightly higher tax bills next year.
(8/3/14)- The Senate passed the House legislation to fund the Highway Trust Fund financing for a 10-month patch through May 2015. The House had rejected the bill passed by the Senate earlier that would have extended the funding with a different methodology through December 19, 2014.
The Senate accepted the House version of the bill by a vote of 81-13, and President Obama indicated that he would sign the measure immediately.
The House measure transfers $10.8 billion into the fund, but it utilizes “pension smoothing”, which members of both parties had derided as a budget gimmick. Funding for the Highway Trust Fund had originally been done as a 5-year matter, which was then cut to a 2-year plan, but with a divided Congress has become an even shorter term funding dispute.
(8/1/14)- With Congress contemplating going into recess after Friday, August 1, it is running out of time to approve the spending levels to be contained in the 12-spending measures that comprise the budget for which the two-year deal lawmakers arrived at last December. A more likely course for Congress to travel will be to pass stop-gap measures to keep the government running.
The House has approved 7 spending bills, while the Senate has yet to take final votes on spending bills, though its appropriations committee has passed 8 measures.
(7/29/14)- Senate leaders have agreed to vote on a bill to replenish the funding for the Highway Trust Fund. Senate Majority Leader Harry Reid (D., Nev.) said the Senate will take up a $10.8 billion bill that the House passed as noted in our item dated 7/19/14 below, but will allow votes on four possible amendments.
The House passed measure keeps the fund going through May 2015.
(7/19/14)- The House in a 367-to-55 vote passed its plan to replenish funding for the federal Highway Trust Fund. The federal Transportation Department was prepared to cut construction spending by 28% on August 1.The Senate is expected to act next week on this matter.
Since the Senate will be going into recess shortly, political experts predict that this legislative body will not approve the measure that emerged last week from the Senate’s Finance Committee, but will go along with the House measure, since that would avoid having a House-Senate negotiating committee being empaneled to resolve any differences between the legislation adopted by the 2 legislative bodies.
(7/14/14)- Both the Senate and the House have advanced measures that would replenish, on a temporary basis, the federal Highway Trust Fund, which will run out of money in August. If the Trust were to run out of funds it would have a devastating effect on the economy, since it would bring to a halt construction on bridges, highways and mass-transit projects at the height of the construction season, and negatively impact the economy.
The House Ways and Means Committee, in a voice vote, approved legislation that would transfer $10.8 billion to the fund by relying on financing mechanisms unrelated to transportation spending. The measure would extend the financing through May 2015.
The Senate Finance Committee approved a measure to extend financing for the fund by about the same amount as the House version, but it would obtain the financing for it by adherence to stricter compliance with existing tax laws, including taking Medicare payments from doctors and other medical providers who are delinquent on their taxes and tightening up on compliance with mortgage-interest deduction rules.
Both the House and Senate measures would transfer funds from a trust fund designed to handle cleanup expenses from leaking storage tanks. The House version of the measure would extend customs fees on importers that will expire shortly.
The House plan would also be financed through a maneuver known as pension smoothing, which increases tax revenues by allowing companies to delay tax-deductible pension contributions, and by unspecified user fees.
The federal government spends about 1/4th of the nation’s costs for road and mass-transit projects, according to the Congressional Budget Office.
(7/9/14)- The U.S. Treasury is expected to announce on Friday that the federal government had a $96 billion surplus for the month of June. The June data, which follows a $130 billion deficit in May, is expected to be helped by gains in estimated tax and corporate tax collections, offset by a moderate rise in spending. The federal government ran a $680 billion in its fiscal year of 2013.
(7/3/14)- If Congress can’t reach agreement on a budget or stopgap funding by October 1, another government shutdown could ensue. The depleted Highway Trust Fund needs to be replenished or states could be forced to suspend road and bridge projects at the height of the construction season in August.
The 12 appropriation bills needed to allocate spending in the coming federal fiscal year that begins October 1 still have not been acted on by Congress.
(6/16/14)- Because of increases in tax receipts and cut backs in federal spending, the U.S. budget deficit from October, 2013 through May, 2014 narrowed to $436.38 billion, which is about 30% less than what it was a year earlier, according to the latest figures from the U.S. Treasury Department.
This is the smallest deficit since 2008. The deficit for the month of May was $129.97 billion, down 6% from the May 2013 deficit.
(5/13/14)- The Congressional Budget Office (CBO) estimated that the federal government had a budget surplus of $114 billion in April. That is $1 billion more than a year ago, and would be the biggest April surplus since 2008. It estimated that receipts were 2% higher in April versus the same month a year ago. Spending rose 2.5%. The CBO estimated that the total deficit to be $301 billion, down $187 billion compared to the same period in 2013.
As we stated in our item dated 5/9/14 below, last December, Congress passed a two-year discretionary spending cap of $1.014 trillion for which the 12 spending bills now have to be set.
(5/9/14)- Now comes the hard part. Back in December, Congress passed a two-year bi-partisan budget that capped discretionary spending at $1.014 trillion. That amount now has to be divvied up among the 12 spending bills that Congress must pass each fiscal year. About two-thirds of the spending goes toward fixed costs such as Social Security, Medicare, etc.
The House just passed the first two spending bills with bipartisan votes, and the Senate will take up its first two spending measures at the end of the month.
House Appropriations Committee Chairman Hal Rogers (R., Ky) will release his 12 allocations in the coming week, and the Senate will do the same shortly.
(4/12/14)-The Treasury Department announced that the federal budget deficit for the first half of the fiscal year ended March 30 totaled $413 billion, down $187 billion from where it was at this point last year, as tax revenue surged and spending declined.
Revenue collected for the month of March climbed to $216 billion, up from $107 billion last year, thus reducing the deficit for the month to $37 billion. Spending dropped by 14%, or $40 billion. This was the smallest deficit for March since 2000.
Corporate tax collection increased by $17 billion, in the first 6 months of the fiscal year to $117.5 billion, while the Defense Department’s spending decreased by $20 billion.
(3/1/14)- The U.S. Treasury closed the books on the fiscal year ended September 30, 2013 by announcing that the deficit had dropped to $680 billion, from about $1.1 trillion in the fiscal year 2012. That is the smallest deficit in nominal amount since 2008.
The deficit fell to about 4.1% of the gross domestic product (GDP). One of the bigger surprises was the slowdown in the pace of health spending. Revenues rose $324 billion, to $2.8 trillion from fiscal 2012, which is a reflection of both higher tax rates and an improving economy. Also helping out the revenue side of the equation was the fact that a payroll tax holiday expired.
Total governmental spending rose to $3.9 trillion, from the year earlier level of $3.8 trillion
(2/15/14)- By a vote of 55 to 43, the Senate approved a House-passed bill to extend the U.S. borrowing limit through March 15, 2015. There were no conditions or amendments attached to it. President Obama is expected to sign the bill shortly.
The Congressional Budget Office (CBO) estimated that the federal fiscal year deficit ending September 30, 2014, would be the lowest since 2007, or before the Recession of 2008. At the same time it said that because of the sluggish growth we are going through would result in greater deficits than had been previously estimated.
The projected deficit will narrow to an estimate $514 billion by the end of September, which equals about 3% of the gross domestic product (GDP). The actual deficit in was $680 billion in fiscal 2013, and $1.4 trillion in fiscal 2009.
The White House had set a target of 3% of GDP for the deficit, which will actually happen, if things go according to projections.
(1/24/14)- Here we go again!!!!We have the budget issue behind us, but now the debt ceiling issue raises its ugly head. In October, Congress agreed to suspend the government’s debt ceiling until February 7. Congress was able to come to an agreement on governmental spending through September 30, 2014, but according to Treasury Secretary Jacob Lew the U.S. government will exhaust its borrowing power by the end of February.
An earlier estimate by Mr. Lew gave an early March date for reaching the limit on borrowing, but the Treasury has the ability to take emergency steps that could extend that time frame.
(1/19/14)- The Senate, followed up on the earlier approval by the House of a $1.012 trillion 1,582 page budget, that has now gone on to the president for his signature. The vote for approval in the Senate was 72-26, being supported by 17 Republicans, 53 Democrats and 2 independents. The president is expected to sign the measure.
The agreement will fund the government through September 30, 2014. The bill removes the spending constraints imposed in 2011 known as sequestration. The increase from last year’s $986 billion in discretionary spending includes more money for biomedical research, preschool education and infrastructure programs that are top administration priorities.
The bill would exempt disabled veterans and those receiving survivors’ benefits from a planned cut in the cost-of-living adjustment to pension benefits for military retirees of working age. The bill is expected to reduce budget deficits by about $23 billion over 10 years.
A stop-gap emergency measure has been passed that will keep the government running through Saturday, when the president is expected to sign the current bill.
(1/15/14)- The U.S. Treasury reported that revenues for the month of December exceeded expenditures by $53.22 billion, the first surplus for the month since the 2007 fiscal year and the largest on records. The figures are somewhat distorted because both Fannie Mae and Freddie Mac made substantial payments to the government.
The federal deficit for the last quarter of the 2013 fiscal year was $173.60 billion, down 41% from the $293.30 billion shortfall for the 2012 year. As these good numbers continue to flow in, Congress loses the sense of urgency that existed when the financial crisis struck in 2008.
(1/7/14)- In the year 2014, the House will be in session a total of 97 days before Election Day, the last on October 2, and for a total of 112 days for the year. Last year, when the 113th Congress was the least productive session in history, with only 65 laws having been passed, the House was in session 118 days before November, and 135 days in all.
The House was last in session on December 13, and will return to its work today. And you thought college kids got a long winter break!!!!!!!!
(12/28/13)- While the rest of Congress is off on vacation, the Congressional Appropriations Committees have been busy trying to negotiate the details on how to spend the extra sums set under the terms of the 2-year budget bill recently signed by President Obama.
Legislators involved in the discussions have stated that they hoped to get the deal closed by the January 15 deadline set for the measure. There are 12 separate items set in a budget bill, and since Congress does not reconvene until January 6 that does not leave too much time get the deal done. The House and the Senate Appropriation Committee break down the exact details for spending bills
The $1 trillion measure splits an extra $45 billion between domestic and military needs but a large chasm exists among the participants just exactly how that money is to be spent.
(12/25/13)- Now that a signed, sealed and delivered 2-year budget agreement is in place, we go on to deal with the next financial cliff that Congress face, namely the debt ceiling limit which will be reached in February. As we noted in our item dated 12/8/13, although the Congressional conference committee did manage to come up with a negotiated budget agreement, arriving at a debt ceiling limit agreement will be even harder to come to terms with.
Although the 10-year U.S. Treasury now stands at the 02.95% as opposed to the 01.62% level that it was at in March of this year, the economy is not what one would call “robust”. Thus we will keep a cautious eye on this matter.
(12/8/13)- The financial health of the states continues on a slow but steady course as is reflected in the latest statistics out of California. The state’s independent legislative analyst’s office reported last month that at the end of its current fiscal year in June, the state will have a $2.4 billion reserve, more than double the $1.1 billion previously estimated. At one point the state was about $20 billion in the red.
California’s legislature felt that it was therefore justified in increasing the salary of its members by voting a 5.3% salary increase bringing the members base pay to $95,291 from $90,526. In addition to the base pay the increase applied to their per diem lodging and expense handout of $163. Some of the legislators have refused to accept the increase.
Democratic Governor Jerry Brown’s pay will go up to$173,987 from $165,528.
(11/4/13)- The 29-member House-Senate conference committee met as Congress tries to find a middle ground for budget negotiations, which has a December 13 deadline. The purpose of the negotiations is to replace the automatic sequestration that cut spending by $110 billion, and if it were to remain in place, would total $1.2 trillion over 10years.
The next regularly scheduled meeting for the negotiators is November13th, though leaders will hold private talks in the interim. Although it is hoped that a “grand bargain” can be reached, in all likelihood a one or two year agreement is the best that can be hoped for.
The conference committee was created as part of the deal between President Obama and Congress to reopen the government after a 16-day shutdown and to raise the country’s debt limit. The December 13 deadline is intended to give the House and Senate time to enact legislation to finance the government after current funding runs out January 15.
Administration officials announced that the federal deficit for the fiscal year that ended September 30 had dropped to $680 billion, after four straight years of annual deficits in excess of $1trillion. That deficit represents 4.1% of the country’s gross domestic product, down from a peak of 10.1% in 2009. Increased revenues, and lowered spending as a result of the sequestration are the reasons given for the reduced deficit.
(10/8/13)- The present federal debt ceiling was set in August 2011 at $16.7 trillion. The government hit that ceiling in May, but the Treasury Department has used “extraordinary measures” to continue borrowing, while staying under the limit.
Treasury Secretary Jacob J. Lew has stated that the department has run out of devices to stay under the ceiling, making it impossible to borrow thereafter. The government will be unable to pay its obligations in full thereafter. It could selectively make certain payments, but it is ridiculous to try to choose which to pay and which not to pay.
A payment of $12 billion for Social Security benefits is due on October 23. $6 billion in bond interest payments is due on October 31.The U.S. credit rating was lowered by S&P from AAA to AA-+ in 2011. A stock market correction of over 10% followed shortly thereafter.
(10/4/13)- Governor Andrew Cuomo is the latest state official to announce a vastly improved state budget outlook for his state for the coming years. When he came into office in 2011, the state faced a $10 billion deficit. Mr. Cuomo, a Democrat said that he projects a surplus of $10 billion in 2016, and $1.9 billion 2017.
A commission that he appointed to make recommendations came back with a report that focused primarily on property and business tax cuts. The commission was co-chaired by former Republican Governor George Pataki, and former Democratic state Comptroller Carl McCall.
Even though it may be happening very slowly, as shown by the gradual decrease in the unemployment rate, the country is continuing on the road to recovery. Mr. Cuomo will be up for re-election in 2014.
(9/2/13)- As Congress reconvenes it is faced with two major monetary must do items. Number one is the budget needed for the start of the federal government’s fiscal year which runs from Oct 1 thru September 30 of the following year. The second item is the debt ceiling which stands at$16.7 trillion, after Congress increased it by $300 billion in January.
According to the latest figures from the Treasury Department, the government will reach the debt ceiling sometime in the middle of October.
Both the White and Congress have indicated that they would like to arrive at a larger budget agreement that the one that was arrived at by the $85 billion “sequester” temporary solution that was arrived at, but that is easier said than done.
If past history is looked at, Congress will pass a “continuing resolution” to keep the government running past September 30, 2013, but this temporary solution does not solve the problem, but rather, only postpones it.
(8/14/13)- The latest Treasury Department figures show that revenues from October to July, the first 10 months of the federal fiscal year totaled $2.287 trillion, up about 14% from a year earlier, while spending decreased slightly.
The deficit for the first 10 months of the year stood at $642 billion, compared to $1.087 trillion in the same period a year ago, and the smallest gap since $458.55 billion in 2008.
With the debt ceiling due to be hit some time after Labor Day, these improving figures may create a problem in that Congress may feel there is no urgency to act on the ceiling.
(7/30/13)- Treasury Secretary Jacob Lew, appearing in a series of television interviews on Sunday, predicted the U.S. would likely hit its statutory borrowing limit, now $16.7 trillion, sometime after Labor Day. If Congress fails to lift the cap, the federal government will be unable to borrow any additional funds.
(7/13/13)- The federal deficit was $509.83 billion for the first nine months of the current fiscal year, which is down about 44% from a year earlier, according to figures released by the Treasury this week. Revenue was up about 14% over the comparable period of time last year.
The House and the Senate had approved a budget resolution that sets the total spending for appropriation bills, but they failed to come to an agreement on the breakdown for the various governmental departments, so here we go again.
The Democrats in the Senate came up with appropriation bills that totaled $1.058 trillion for the roughly 40% of the budget that Congress sets each year, while the Republican led House came up with a figure of $867 billion.
(7/12/13)- The U.S. government is probably the biggest beneficiary of the low interest rate environment that we have been in the last few years. Just imagine how much bigger the deficit would have been if the government had to pay a higher interest rate on the bills, notes and bonds it was issuing.
The improving economy was one of the key factors involved in the Obama administration's lowering of the deficit estimate for fiscal 2013 by $214 billion, compared with the last estimate in April.
Also helping to improve our fiscal balance sheet were the dividends from Fannie Mae and Freddie Mac of $66 billion and $43 billion from mandatory sequester spending cuts. Interest payments from the federal reserves bond and mortgage portfolio kicked in another $83 billion in revenues.
Net interest on federal borrowing is projected at $224 billion. The net interest paid on federal borrowings now is around 1.7% of the total held by the public, compared with 6.3% back 18 years ago.
The interest rate on 10-year U.S Treasuries has risen from 1.6% in May to the 2.6% mark today. This rise in interest rates means the government will have to bear the brunt of paying higher interest rates in order to be able to sell the various Treasury issues.
(5/15/13)- Although many economists are surprised at the fact that the budget deficit is shrinking faster than they expected, it should come as no surprise to those of you who have been viewing this site. As the economy improves, the deficit will shrink. An improving economy means more revenue for the government, since income levels increase in an expanding economy.
The latest data from the Congressional Budget Office estimated that the deficit for this fiscal year that ends September 30th will fall to about $642 billion, or 4% of the gross domestic product (GDP). This estimate cuts $200 billion from the agency's estimate just 3 months ago.
The deficit had topped 10% of GDP in 2009. One of the reasons for the swelling in revenues was the miscalculation that Congress would increase the tax on dividends and long-term capital gains from 15% to 20% in 2013. Many corporations had declared special dividends at the end of 2012, hoping to give their shareholders a break, but when the tax rate stayed at 15% many of those who received those dividends were stuck with a higher tax bill in 2012.
Taken together with the sequestration that took place and other cuts in spending, the deficit continues to fall.
(5/11/13)- Even though the statutory debt ceiling of $16.4 trillion by May 19 will be reached shortly, because of increased revenue from tax collection and bailout paybacks, the federal deficit is falling faster than expected.
Fannie Mae, the mortgage finance agency said it would pay the U.S. government $59.4 in dividends at the end of June, and Freddie Mac announced that it would pay back at least $7 billion that will all go directly into the federal treasury
Because of the improving economy, especially with the stock market making new highs, and changes in the tax law that also increased the revenue side of the equation, is resulting in the federal deficit shrinking.
(3/27/13)- The U.S. Congress passed a "continuing resolution" that will keep the government funded and operating through the end of its fiscal year, September 30th. The previous funding bill was due to expire on March 27th.
The bill keeps overall total spending at the level mandated by the sequester, meaning the overall $85 billion in cuts that began March 1 remain in place. It was approved in the House on a 318-109 vote, and also passed in the Senate with a large majority favoring it.
The battle for the 2013-2014 budget still lies ahead, but Congress will continue the battle when it reconvenes with both the Republican and the Democrats adamantly fighting for their separate views to prevail.
(2/20/13)- The last several months has seen such terms as "fiscal cliff'", debt ceiling and now sequester bandied about as the nay sayers wring their hands and predict the end of the United States. In the last four years, the European debt crisis, the downgrade of the U.S. credit rating, increased budget deficits on both the federal and state level thrown around, as the "doom and gloom "gang continues to predict the decline in this country as a world economic leader.
These "wise men and women" are not looking at the fact that slowly but surely the U.S. economy continues to improve from the fall it took in 2008 because of the banking and housing crisis. Both those industries are slowly but surely recovering. So far this year, there has only been 3 banks closed by financial regulators in this country.
With the interest rate level continuing to look like it will remain low for many months to come, and the employment rate continuing to also slowly but surely increase, a brighter day lies ahead towards a balanced budget.
Medicare, Medicaid and the Social Security issues that are garnering all the headlines these days will be resolved and that is what the scoreboard is telling us. You may ask: "What scoreboard am I talking about". The scoreboard I am talking about is the fact that the Dow Jones Industrial average is now within 1% of its all-time high set in October 2007.
(2/14/13)- The federal government reported a budget surplus for the month of January of $2.88 billion, compared with a deficit of $27.41 billion in January 2012. It was the first time January showed a surplus since 2008.
The federal deficit for its fiscal year that began October 1, 2012 is $290.42 billion, down from the $349.14 deficit for the prior year.
January receipts rose to $272.23 billion. Keep in mind that the employee's payroll tax went back to 6.2% from 4.2% at the beginning of the year. The Congressional budget Office (CBO) estimated that this meant an increase of $9 billion to the government for its coffers.
Another key reason behind the increase in revenue was the special year-end dividends paid by corporate America to its shareholders, because of the belief that the tax rate on dividends would be increased from the 15% level that it stood at. That increase failed to materialize to any great extent.
(2/6/13)- President Barack Obama signed into law a bill raising the government's borrowing limit and avoid a default by the U.S. on its obligations.
The legislation temporarily suspended the $16.4 trillion limit on federal borrowing. The Senate gave its final approval to the bill last week. The legislation includes a provision attached by the House Republicans that would withhold pay in either chamber if a budget is not approved.
(10/20/12)- Obama officials reported that the federal deficit for the fiscal year, which ran from October 1, 2011 through September 30, 2012 came in at $1.1 trillion, down from $1.3 trillion a year earlier. This is the lowest deficit since 2008, but it is the fourth year in a row in which the deficit exceeded a trillion dollars.
Total federal spending in fiscal 2012 was $3.5 trillion, while receipts totaled about $2.45 trillion. Receipts increased by 6.4% year-over-year as the economy continued to improve resulting in higher corporate income taxes.
Spending decreased by $61 billion because of falling military spending and the tapering out of the stimulus spending that has been taking place since the recession of 2008.
The nation now awaits to see what Congress will do before the end of the year when the Bush era tax cuts are due to expire, and the automatic sequestration or cutting of spending will take place, including the cut in defense spending.
(9/17/12)- The House voted 329 to 91 on a $500 billion spending measure that will keep the government operating through the end of March. The measure will now go on to the Senate, which is expected to pass it and then send it along to President Barack Obama for his signature. This emergency spending measure was necessary since Congress did not pass any of the 12 spending bills required each year to keep the government funded on a yearly basis.
70 Republicans voted against the measure. It keeps federal spending at current levels. It includes $45 billion to fund military operations in Afghanistan and $3 billion in additional funding for domestic disaster relief. It extends a pay freeze for federal workers and members of Congress through the end of March.
This six-month bill covrers about a third of federal spending with the remainder (Medicare, Medicaid and Social Security, etc.) being renewed automatically without Congressional action.
The Obama administration reported that at the end of 11 months for the fiscal year 2013 the deficit totaled $1.164 trillion, down from the $1.234 trillion at the end of 11 months for the prior fiscal year.
(9/11/12)- Congress is back in session this week, and among its first priorities, the House will seek to pass a short-term spending measure that would keep the government operating ahead of an October 1 deadline for enacting spending bills for the 2013 spending year which runs from October 1, 2012 through September 30, 2013.
(8/7/12)- Under the terms of the agreement to extend the continuing resolution for the federal government's funding through the end of March that was reached between Democratic and Republican leaders, the spending rate was increased slightly from the current one. Congress, which is in recess for the next five weeks, will still have to approve the agreement when it comes back from its holiday.
The continuing resolution for spending through the end of March, in effect means that the "lame duck" Congressional session, which would be sitting from after the November elections through January, would not have to deal with this question.
(8/1/12)- Leaders of the Democratic and Republican parties have agreed to a compromise that will extend the debt ceiling for another 6 months.This agreement will mean that the federal government will not be faced with a shutdown, until some time after the "tax cliff" extension question comes up at the end of the year.
The president's Office of Management and Budget (OMB) now estimates that the budget deficit for fiscal year 2012 will be slightly lower than its projection earlier this year and it will also be lower than the earlier estimate called for in the upcoming decade.
Its required update for the mid-fiscal year showed that while revenues are coming in lower than projected, federal spending would be lower also.
The estimate for the fiscal year 2012 now calls for a deficit of $1.2 trillion, which is $116 billion lower than the $1.3 trillion deficit that was the estimate made in February.
The new estimate equals 7.8% of the GDP, down from the 8.5% figure in February.
In the decade from fiscal year 2013 to 2022, total deficits will be $240 billion lower than projected in February by the OMB.
(6/5/12)- Ever since the latter part of April the stock market has been declining even though interest rates have also been heading lower for U.S. Treasury obligations. As of the close of the market yesterday the 10-year U.S. Treasury was slightly above the 1.50% mark and the 30-year U.S. Treasury stood at just about the 2.60% level.
Europe led by Greece and Spain has been in turmoil, there are considerable alarms being sounded for the economies of the Asian nations and the expiration of the debt ceiling and tax cutting legislation is due by the end of the year.
If Congress can not arrive at debt reduction legislation, "sequestration" or automatic cuts are to take place, Included in these automatic cuts will be the military budget by about $600 billion dollars.
At the same time the media is highlighting the cuts in pension benefits, increase in health care premiums for both present workers and retirees and their families.
Even the winding down of the war in Iraq and Afghanistan don't seem to be helping with the budgetary quandary. Automatic cuts to Medicare and Medicaid spending are also included in the "sequestration" that might take place at the beginning of next year.
Will Congress act, either before the election or in the lame duck session immediately thereafter? The optimists say "yes" and the pessimists say "no".
The Supreme Court announcement of the decision on the constitutionality of the new Health Care Act before the end of this month will also come into play.
Can Congress come up with a bipartisan plan and help to resolve these issues? Those are the $64 questions.
(4/28/12)- State tax collections for the fourth quarter of 2011surpassed the record high amount collected in the fourth quarter of 2007 by a total amount of 3%. There still were 17 states that collected less in 2011's fourth quarter than what they had collected in 2007's fourth quarter.
The total amount of state tax collection grew by 3.6% in the fourth quarter of 2011 from a year earlier's fourth quarter. All these figures are contained in the latest report issued by the Nelson A. Rockefeller Institute of Government.
Total tax collections came to $184.1 billion in the fourth quarter of 2011, even though property tax collections continue to trail prior collections before the recession.
State and local governments added 11,000 jobs in the first three months of this year, compared with a loss of 58,000 in the first three months of 2011
(4/13/12)- The Treasury Department reported that it collected $171 billion in taxes and other revenues last month, which was the highest March total since 2008.
Individual income tax revenue from October through March, was $484.1 billion, an increase from the $475.6 billion collected in the same period last year. Corporate income taxes rose to $84.5 billion from $55.1 billion.
The 6-month deficit for the period ended March 31, 2012 was $778.8 billion, down $50 billion than for the same period of time last year.
Government spending for the month of March was $369 billion, which was the highest amount ever spent in one month by the U.S. Government. The Treasury's deficit for the month of March was $198 billion, a one-month record deficit. $30 billion of this increase was due to the fact that it went to pay benefits that normally would have been paid on April 1, which was a Sunday, so it was paid in March.
According to the latest estimates, the deficit for the federal budget, which runs from October 1, 2011 through September 30, 2012 will be $1.2 trillion, down from $1.3 trillion in 2011.
(3/23/12)- As further proof indicating that the economy is improving, the 50 state governments have their cumulative budget gap down to an estimated $47 billion, according to the Center on Budget and Policy Priorities, which is less than half what it was from the budget shortfall last year, and down from the $191 billion level three years ago.
For their coming fiscal year, which starts in July, 29 states have projected deficits, down from the 42 states that had projected deficits a year ago.
Overall, local governments added 2,000 education jobs last month, while states cut 1,000 of them, according to the February statistics from the Labor Department.
State and local governments cut 647,000 jobs from their collective payrolls since mid-2008. It looks like that trend is coming to an end.
(3/19/12)- The federal budget deficit for its fiscal year of 2011-12, which ends September 30th, 2012 continues to slowly improve. Income-tax withholdings grew 4.1% in February. On a rolling 12-month basis, the deficit is at $1.2 trillion, which is only $60 billion lower than a year earlier.
The deficit is $330 billion below forecast. Total receipts through January were 4.9% higher than the same period in fiscal 2011, and expenditures are running 3.3% lower.
Even though the recovery is indeed a fragile one, it continues to inch ahead. President Obama estimated that the deficit for fiscal year 2012 would be $1.327 trillion.
(2/20/12)- The House of Representatives and the Senate passed the bill that would cut the Social Security payroll tax from 6.2% to 4.2% for the balance of this year, avoid the Medicare payment cut of 27% to doctors and extend unemployment benefits for approximately 73 weeks, depending on the rules of each particular state.
The president indicated he would sign the bill. Of the 293 House members who voted in favor of passage of the bill, the Democrats and the Republicans were just about evenly split in voting for the legislation. 147 Democrats voted in favor of the bill, as did 146 Republicans .
In the Senate the vote was 60 Senators in favor of the bill and 36 voting against the measure.
With the war winding down in Iraq, what should be done with the money being saved with the savings effectuated by our withdrawal from this war? The Democrats argue that we should use this funding to eliminate the need to have Medicare spending for doctors and hospitals cut, as required by the Medicare formula.
The extension at the end of last year of the payroll tax cut through the end of February, also included a provision to maintain Medicare payments to doctors and hospitals without the legally required cut that was to have taken place under the Medicare law. Unemployment benefits were also extended through the end of February for the unemployed for an additional period of time.
Under the terms of the Medicare law, reimbursements to doctors and hospitals was to have been cut by 27%.
House Republicans want to reduce certain payments to hospitals, so that there would be no need to cut doctors' Medicare payments by the required 27%. Incidentally, even though the formula has called for cuts before to physicians who are in Medicare, this has never happened yet.
The Medicare Payment Advisory Committee has recommended that the government should pay same rates for "evaluation and management" services regardless of whether they are performed in doctors' offices or hospital outpatient departments. Rates for hospital clinics are now much higher than for services done in doctors' offices.
For more information on the Medicare Payments Advisory Commission please see this panel in our Helpful Websites Article.
(1/30/12)- The Senate voted on Thursday, January 26, by a 52-to-42 not to take up the House's "resolution of disapproval", as we noted in our item dated 1/21/12 below. The vote was along party lines, and as a result thereof, the debt ceiling will be increased by $1.2 trillion to$16.4 trillion, from the $15.2 trillion current level.
As recently as fiscal year 2009, the debt ceiling was $12.1 trillion. The deficits the last two years were about $1.3 trillion, down from the $1.4 trillion in 2009.
When President Barack Obama came into office he hoped to bring the deficit down to more manageable levels during his first term in office. Shortly after he took office the country was being pummeled by the recession of 2008 that lasted through early in the summer of 2010.
(1/21/12)- The House of Representatives voted 239-176 to reject the increase in the debt ceiling by $1.2 trillion. Three Republicans did not vote in favor of the rejection. Representative David Dreir (R., Cal.) joined most Democrats in supporting the increase, and two other Republicans voted "present".
The measure will now go on to the Democratic controlled Senate that is expected to approve the increase. Even if the Senate voted against the increase, President Obama would veto that measure, so that the automatic increase of $1.2 trillion in the debt ceiling will take place..
(1/19/12)- The U.S. Treasury began to limit its investments in the exchange stabilization fund, a reserve account related to foreign-exchange holdings so that it would stay under the legal debt limit. Treasury Secretary Timothy Geithner sent a letter to Senate Majority Leader Harry Reid (D., Nev.), House Speaker John Boehner (R., Ohio) and other Congressional leaders in which he stated: "unless a joint resolution of disapproval is enacted, the debt limit will be increased…effective January 27, 2012".
Mr. Geithner also told Congress that until the limit is increased, the Treasury will be unable to invest fully in the Government Security Fund, or G-Fund, a money-market defined contribution retirement fund for federal employees.
As we noted in our item dated 1/14/12, even if both houses of Congress voted against the automatic $1.2 trillion increase in the debt ceiling, the president could veto that resolution and the increase would then automatically take place.
Once this debt-ceiling increase takes place, it is unlikely that a further increase will be needed until after the election.
(1/14/12)- President Obama notified Congress on Thursday, January 12th that the government was near its $15.194 trillion borrowing limit.
Under the terms of the budget act, Congress has 15 days after the president submits a request for additional borrowing authority to vote on a motion to block it. The House will come back into session on January 17th and the Senate will do so the following week.
If Congress votes against the automatic $1.2 trillion increase in the ceiling, the president can veto their action, so that the increase would then take place.
As of Tuesday, the U.S. debt was just $25 million below the debt ceiling. The Treasury Department already had begun emergency measures to delay hitting the limit, while it waited for Congress to return from its holiday break.
The Treasury will limit or suspend investments in certain federal pensions so as to be able to stay within the confines of the debt-ceiling limit until the automatic increase takes place.
The federal government has operated at about a $1.3 trillion deficit for the last 2 years, but that deficit should decrease in the fiscal 2011-2012 year, mainly because of the improving economy.
(12/31/11)- Under federal budgetary law, the administration is required to notify Congress when the government's borrowing comes within $100 billion of the current debt ceiling which is currently $15.194 trillion. This limit is expected to be reached on Friday, December 29th, so the president will ask Congress for a $1.2 trillion increase to $16.394 trillion.
The latest increase would be the third and final one called for under the deal that Congress and the president reached in August. The two prior increases came to a total of $900 billion.
The Republican led House could try and block the automatic increase that is due to go into affect on January 14th, but the Democratic led Senate is likely to oppose any attempt to alter the prior agreement. If both houses of Congress voted to block the increase, Mr. Obama could veto the legislation.
In the fiscal year that ended September 30th, the federal government spent $3.6 trillion and collected $2.3 trillion
(12/19/11)- A provision in California's budget for the fiscal year that began July 1 required midyear cuts if less revenue materialized than hoped for seems likely to occur causing a shortfall of about $2.2 billion. Governor Jerry Brown announced that the state had expected about $88.5 billion in revenue, but it now looked like revenue would come in at about $83.3 billion
California's Legislative Analyst's Office had estimated a $3.7 billion shortfall last month, so even worse cuts will not have to be enacted.
Those being cut include: $100 million from in-home health care for the elderly; eliminating $248 million in state money allocated for busing students; and trimming $100 million from the California State University and $100 million from the University of California systems.
It was originally expected that 7 days would have to be cut from the public school calendar, but this will not be necessary.
All this is taking place even though the state's tax revenue is higher this year than it was last year and state and municipal layoffs have taken place.
On the federal budget front, the continuing resolution that is keeping the government funded expired on December 16th. Legislative leaders have finally reached an agreement on a budget for the fiscal year that began on October 1, 2011, but this budget was not finalized in time so that another continuing resolution was needed to keep the government running until it could be officially passed and sent on to the president for his signature.
(12/2/11)- Slowly but unevenly, state budgets continue to improve in spite of all the dire predictions about our economy and the European debt crisis. For the second year in a row state budgets are due to rise which in the case of the 2012 fiscal year means an increase of 2.9% to $666.6 billion, according to a recently released report from the National Governors Association and the National Association of State Budget Officers.
Spending cuts continue to be the states' primary budget-balancing tool. 29 states used targeted spending cuts to narrow their fiscal year 2012 budget shortfalls, while 18 states made across-the-board reductions in spending, while 17 states narrowed the gap by reducing aid to local governments.
Cut-off of federal stimulus money means less funding available from the federal government as reflected by the fact that only $3 billion in stimulus money is available in fiscal 2012 versus the $50.3 billion that was available in fiscal 2011
For fiscal year 2012,, state budgets call for a $19.4 billion increase in Medicaid spending, while other high priority items such as spending on higher education is due to fall by $3.2 billion.
(11/20/11)- As we noted in our item dated 10/1/11 below, the continuing resolution that kept the government funded was due to expire on 11/18/11. Well the battle isn't entirely over, but with the passage of another continuing resolution that will expire on December 16th, a portion of the federal fiscal year budget that ends on September 30th has been set.
In a 70-30 vote in the Senate, and a 298-121 vote in the House, several of the federal governmental departments received their allocations from the federal budget for their 2011-2012 budgets. In total $128 billion was appropriated for the departments of Agriculture, Commerce, Justice, Transportation and Housing and Development.
Once Congress had passed the measure and sent it on to the president for his signature, Mr. Obama directed that a machine imprint of his signature be used to sign the legislation since he is overseas and could not do it in person.
For all other departments not included in this resolution, spending must be maintained at present levels through at least December 16th.
(10/30/11)- The 12-member super congressional committee has until November 23rd to come up with its report. The panel's membership is split equally between Democrats and Republicans.
The two leaders of the panel are Senator Patty Murray, Democrat of Washington and Representative Jeb Hensarling, Republican of Texas. The committee is supposed to write legislation reducing deficits by at least $1.2 trillion over 10 years.
If legislation to save that amount is not enacted, the president is to make up the difference by imposing across-the-board cuts in most military and civilian programs in January 2013
(10/19/11)- The Congressional Budget Office, in its monthly assessment of the government's finances estimated that the federal government ran a $1.3 trillion deficit for the fiscal year 2011, which ended on September 30th. This was the same amount of deficit as it was for fiscal year 2010.
The deficit was the equivalent to 8.6% of the gross domestic product, down from the 8.9% in fiscal 2010, but still was the third-highest percentage since 1945.
(10/7/11)- In a session that only lasted about 10 minutes, the House of Representatives voted 352 to 66 to approve the continuing resolution passed by the Senate last week that will keep the government funded through November 18th. The measure then went to President Obama for his signature.
53 Republicans opposed the measure, and 13 Democrats joined them. The Republicans who opposed the measure felt that there were not enough offsetting cuts contained therein.
Congress now has some time to get a budget passed for the fiscal year that began September 1, 2011, but you don't have to be a Las Vegas odds-maker to recognize the fact that it is unlikely to be done even by that date.
(10/1/11)- It took only 6 minutes for the House of Representatives to pass the continuing resolution that had already been passed by the Senate that will keep the government funded through October 4. Please see our item dated 9/28/11 below for more on this matter. Representative Andy Harris, Republican of Maryland presided over the pro forma session, since the House was in recess for the week.
When the House reconvenes next week, it will take up the more contentious continuing resolution to keep the government funded through November 18th. Once again Congress will probably embarrass itself as the fight between the Republicans and the Democrats regarding having offsetting cuts or not goes down to the wire.
(9/28/11)- The Senate voted Monday night on two funding measures that will keep the government funded through November 18th. The first continuing resolution would keep the government going through October 4, and the second measure would be the needed continuing resolution funding bill to keep it going through November 18th.
The first measure came to pass because Federal Emergency Management Agency's( FEMA) officials announced that its disaster-relief fund still had $114 million left, and therefore would not run out of funds before the end of the month. That meant that no emergency funding was needed for at least a few days, so that the House, when it reconvenes will have time to act on the stop-gap measure to fund the government through the 18th of November.
The Senate vote on the continuing resolution funding bill was 79-12 in favor. The House can pass the measure to fund the government through October 4, at a pro forma session, as long as no one objects, and does not have to re-convene to do so.
The continuing resolution passed by the Senate extends the financing for government agencies for 7 weeks with a 1.5% across-the-board cut from current levels. No offsetting cuts are included in the bill.
(9/24/11)- The Senate rejected the stop-gap spending bill passed by the House, as we discussed in our item dated 9/23/11 below. The vote rejecting the measure was 59 to 36.
Republican House leaders had convinced conservatives to vote in favor of the bill by cutting off a $100 million loan for Solyndra, a now-bankrupt maker of solar panels under scrutiny for its ties to the White House, plus the $1.5 billion in funding for the Energy Department's loan program to promote enerby efficient cars .
Although Congress is scheduled to go into recess next week, Democratic Senator Harry Reid of Nevada said that he would call the Senate into session on Monday. Republican House Speaker John A. Bohner of Ohio will probably do the same with the House.
Both sides indicated that they will continue to negotiate the matter over the weekend.
(9/23/11)- As noted in our item dated 9/19/11 below, the federal government needs to pass a stop-gap funding bill by September 30, but the Senate and the House have different measures that leave a wide gap between the two of them, or the government will have to close down.
The House, late Thursday night, voted to pass the omnibus stop-gap spending measure that would fund the government through November 18th. The measure was the same one that had been rejected Wednesday. It increased funding for the Federal Emergency Management Agency's( FEMA) by $3.5 billion, and cut the Energy Department's loan program that promotes energy efficient cars.
Since the Senate measure calls for additional funding of $6.9 billion in its stop-gap funding measure, with no offsetting cuts, the two differing bills will have to be reconciled with Congressional leaders promising to keep their respective bodies in session over the weekend, since neither the House nor the Senate will be in session next week.
The House on Wednesday rejected the pending stop-gap measure by a 230 to 195 margin, with both Tea Party Republicans and Democratic House members voting against the bill. Six Democrats joined 189 Republicans in voting for the measure, while 48 Republicans joined 182 Democrats in opposing the bill.
Congress will not be in session next week, so its members are rapidly running out of time in passing a measure that can be acceptable to the members of the Senate.
The Tea Party Republicans voted against the bill because the offsetting $1.5 billion in cuts were insufficient and the Democrats voted against it because the $3.65 billion was not enough to properly fund FEMA. The $1.5 billion cut was from an Energy Department's loan program that promotes energy efficient vehicles.
The House version of the spending bill included $3.65 billion to replenish the Federal Emergency Management Agency's( FEMA) disaster relief fund, which is paid for by offsetting cuts elsewhere. The Senate version of the measure calls for about $6.9 billion to go to FEMA, and it does not provide for any offsetting cuts elsewhere in its stop-gap bill.
The FEMA disaster relief fund is down to $270 million and is faced with funding problems because of the expenses it is incurring in connection with the tornado in Joplin, Mo., in May, Hurricane Irene in August and other catastrophes this year
Are we going to be faced with another example of the petty bickering by Congress as we saw in the debt ceiling fight last month, or will the politicians realize that the public is fed up with their political posturing for the upcoming election?
Either the Republicans in the House will have to find an acceptable amount to get the Democrats in the House to go along with the measure, or the government will come to a standstill.
(9/19/11)- With the advent of September 30th just around the corner, and with that date coming up, it means it is the end of the federal government's fiscal year. To no ones surprise, the government will fail once again to have a budget in place by that date.
In order to keep the government running, the House passed a stopgap funding measure that will maintain federal spending for the first 49 days of the fiscal year 2012, through November 18, with a 1.5% across-the-board cut from current levels.
The stopgap bill includes $3.65 billion in assistance for people affected by Hurricane Irene, wildfires, floods, tornadoes and other natural disasters. Cutting a loan guarantee program for production of more fuel efficient cars would offset $1billion dollars of this amount.
The Senate had earlier in the week, by a 62 to 37 vote approved a $7 billion disaster relief measure that rejected any offsetting costs.
(9/15/11)- The U.S. Treasury Department reported that the government operated at a $134.15 billion deficit last month. This was much larger than the deficit in August 2010, which was $90.53 billion.
The 11-month total deficit for fiscal 2011 stood at $1.234 trillion at the end of August 2011, compared to the total deficit of $1.26 trillion at the end of August 2010.
The Congressional Budget Office predicts that the federal government will run a $1.28 trillion deficit for the fiscal year 2011 that ends on September 30th.
(8/30/11)- Personal income taxes made up 36% of states' revenue in 2008, up from 26% in 1978 according to the Nelson A. Rockefeller Institute of Government in Albany, N.Y. A large portion of this income came from capital gains, with the stock market rising through 2007. In 2008 a different story evolved, since the Dow Jones dropped precipitously that year, through March of 2009.
Subsequent to March 2009, through April 2011 the Dow Jones rose about 90%. A pullback has ensued since the end of April, but the gain still is about 80% up through today.
(8/16/11)- According to the latest figures from the U.S. Treasury, this country spent $129.38 billion more than we collected last month, raising the deficit for the first 10 months of the fiscal year 2011 to $1.1 trillion. Obama officials have predicted that the deficit for the full year would be $1.65 trillion.
As large as this deficit is, it still is less than what it was for the comparable period in fiscal 2010.
(7/29/11)- One of the many reasons why we lose confidence in governmental reports is because the data that is reported oftentimes prove to be incorrect. As an example of this "incorrect information" the hard deadline of August 2 in connection with reaching the debt ceiling is now proving to be not such a "hard deadline".
Thanks to an increase in tax revenues, and some maneuvering by the Treasury Department it now seems as if the government won't run out of money until August 10th. Please keep in mind that the government is dealing with trillions of dollars and the ability to borrow from other sources on a temporary basis, so stay tuned on this one.
(7/25/11)- The August 2 deadline is a little more than a week away for the debt-ceiling to be increased from its $14.29 trillion limit and no bipartisan agreement is even close in regards to the budget compromise between the Democrats and the Republicans.
Presiden Barack Obama and Republican House Leader John Boehner continue their rhetoric while little gets accomplished. The president's target date for having an agreement in place by July 23rd is past and nothing has been settled as of this date.
Conservatives, moderates, liberals and Tea Party members continue to draw lines in the sand. It looks like it will go down to the wire.
(7/19/11)- As we pointed out in our item dated 7/3/11 below, state and local tax revenues grew in the first 3 months of 2011. On the other hand, local property tax revenues fell by 1.7% in the same quarter, according to the latest statistics from the Census Bureau.
The cause of the drop is twofold; assessed valuations for local properties have dropped in the last few years, and local governments are unwilling or unable to raise property tax rates. Moody's Investors Services estimates that property taxes bring in more than a quarter of local-government revenues. Some economists have estimated that property taxes bring in about up to 45% of a state's revenues.
As we pointed out in the item dated 7/3/11 sales and income tax revenues are a truer indication of current economic conditions, rather than property taxes, which are a trailing indicator of the economy.
Property taxes fell 3% for local governments, according to those same Census Bureau statistics, and this was the first time since 1963 that there were two quarters in a row in which property tax revenues declined.
(7/12/11)- Medicare and Medicaid insure more than 100 million people, account for 23% of all federal spending and cuts to both are likely to be an important part of any budget agreement. Military spending, which accounts for about 20% of federal expenditures, will be part of the budget agreement also. Since these two areas are the biggest items on spending side of the ledger, it is only reasonable to expect that they will be cut.
In spite of all the rhetoric coming out of Washington to the contrary, revenue increases, sometimes known as tax increases have to be part of the final agreement also.
(7/3/11)- As a further indication of the improving health of the U.S. economy, as gradual as it may be, state and local tax revenue grew 4.7% to $321.6 billion in the first three months of 2011 compared with the same period a year earlier according to U.S. Census Bureau data. State revenue grew by 9.3% in the quarter, whereas local revenue fell by 0.64% in the second consecutive quarter of declines.
This was the 6th quarter in a row of year-over-year state and local tax revenue growth. Local revenue continues to falter because of falling property taxes that is the biggest source of revenue for local governments. Income tax and sales tax income goes to the states, so that is why they continue to show growth.
An estimated $135 billion in federal stimulus funds will no longer be available to help the states with their budgetary problems this year.
(6/17/11)- The 6-member negotiating debt ceiling and budget deficit reduction panel that is attempting to come up with a compromise by August 2 consists of Vice-president Joe Biden, House Majority Leader Eric Cantor (R., Va.), Rep. Chris Van Hollen (D., Md.), Sens. Danial Inouye (D.Hawaii) and Max Baucus (D.Mont.) and Rep. Jim Clyburn (D., S.C.).
Treasury Secretary Tim Geithner has stated that unless the budget debt ceiling of $14.29 trillion is increased by August 2, the U.S. Treasury will default on its obligations. The vice-president has stated that he hopes to reach an agreement on the debt ceiling increase by July 1, which then must be presented to Congress for its approval.
(6/13/11)- One of the brightest spots in the economy over the last 2 1/2 years has been the stock market. From a low of about Dow 6,500 in March of 2009 it had risen to about 12,800 in April. With the housing market continuing to falter and unemployment running very high many economic experts were puzzled by this strange behavior.
One of the big question marks that the economy is faced with is the fact that the U.S. Treasury has estimated that this government will default on our Treasury obligations unless Congress increases the debt ceiling of about $14.3 trillion by August 2.
With the stock market having dropped from its high reached on April 29, to the below 12,000 Dow level as of June 10th negotiations are finally picking up. The negotiating group led by Vice President Joe Biden plans to meet 3 times this week, compared with the 6 total meeting that have been held since March.
Basically the Democrats favor tax increases and the Republicans favor spending cuts. The federal government's $3.7 trillion budget in fiscal 2011 is expected to have a deficit of $1.5 trillion.
(6/6/11)- Forty governors have recommended spending more in their 2012 fiscal year, which starts in July, than in the year-earlier period, according to the latest report from the National Governors Association and the National Association of State Budget Officers.
In the past three years, states have used an estimated $135 billion in federal stimulus funds to balance their budgets, but those funds will not be available in 2012.
Medicaid accounted for just over a fifth of states' spending in 2010, even though most of the states attempted to cut Medicaid spending as much as possible.
The governors' proposed 2012 budgets called for a net of $13.8 billion in new taxes and fees, compared with $6.2 billion in tax increases in 2011, and 423.9 billion in 2010
(5/22/11)- Slowly but surely, the dire financial straits caused by the recession of 2008 seem to be ebbing for many of the states. California and New Jersey have been in the limelight recently with announcements about their narrowing budget deficits. Stock market gains and improved corporate earnings are the main reason for the improvement, but various actions taken by the states to reduce their expenditures have also added to the improved situation.
Pennsylvania announced earlier this month that it had collected $506 million more in taxes this year than it had predicted it would. In the case of the state of Michigan the pleasant surprise came to $429 million more in revenue than had been previously expected.
On the other hand the federal stimulus $150 billion in aid will no longer be available to most states.
The Center on Budget and Policy Priorities estimated that 44 states face deficits of roughly $112 billion, so hard times still lie in front of us,
(5/14/11)- U.S.Treasury Secretary Timothy Geithner now estimates that the $14.294 trillion debt ceiling will be hit on August 2,If the ceiling is hit, the federal government won't be able to pay all its bills, which would have a "catastrophic economic impact". Many Republican congressmen feel that the treasury can further delay this deadline, so that August 2 is not a "do or die" target date.
(4/24/11)- Following up on our item of 2/10/11 below, with 45 states now having reported their tax revenue for the first two months of this year, the increased income stood at up 9.5% from the same period a year ago, according to a report issued by the Nelson A. Rockefeller Institute of Government at the State University of New York.
If this pace holds up for the rest of the quarter, it would be the fastest growth rate since the second quarter of 2006.
Since states get most of their revenue from income and sales taxes, the improving economy is the main reason for this increase. Local governments which are dependent on property taxes for most of their revenue, continue to see declines in income, since property taxes are first showing the affects of the decrease in values for homes, as tax assessments also continue to drop.
In the first two months of the year, revenues from personal income taxes increased 14.2% in the 45 states tracked by the Institute, while corporate income taxes revenues were up 11.5% and sales tax revenues rose 5.2%.
States collected $715 billion in total tax revenue in 2010, about $60 billion or 7.8% below the level in 2008, before the recession began.
In light of these improving numbers, it is not surprising to see the Dow Jones Average climb above the 12,500 mark, which is a new recovery high for the last two years. For comparative purposes the Dow was at roughly 6,500 in March of 2009.
(4/16/11)- Congress passed, and sent on to the president for his signature the 2010-2011 fiscal year budget bill that had been due on October 1, 2010. As we noted in our items below, the government remained funded through "continuing resolutions". The president has stated that he would sign the budget bill even though it contained over $38 billion in cuts that had been negotiated with the Republicans.
The House voted 260 to 167, in favor of the budget with 59 Republicans opposing its passage because they thought it did not cut spending as much as the $100 billion that they originally had hoped for. The $100 billion was cut to $61 billion, but after prolonged negotiations between Republican House Speaker John A. Boehner, Senate Democratic leader Harry Reid and the president, that figured was pared to $38 billion.
Many of the newly elected House Republican representatives voted against the measure, which therefore required the votes of the House Democrats in order for the bill to be passed.
Republican Representative Louie Gohmert would have been the 60th Republican in the House to have voted against the bill, but her arrived too late for his vote to be counted.
The Senate voted 81 to 19 in favor of its passage.
The road only gets rockier from here as the next battle in connection with the federal government's finances is the need to increase the debt ceiling which according to Treasury Secretary Timothy Geithner will be reached early in May. The U.S. government had $14.216 in total debt outstanding as of last Monday, the latest available date, just under the $14.294 trillion cap.
The treasury will be able to extend the timeframe for default until probably about mid-July, which therefore is when the deadline will be reached.
In addition to the debt ceiling, Congress will have the 2011-2012 fiscal year budget to contend with.
(3/20/11)- The Senate, approved 87-13 the "continuing resolution" measure adopted by the House that will keep the government funded through April 8th. It now goes to the president for his signature.
By a vote of 271 to 158 the House passed a three week "continuing resolution" that would extend government financing through April 8th.. The measure is expected to contain another $6 billion in cuts that President Obama and the Democrats have already agreed to. More than 50 Republicans opposed the measure including 21 of the 87 Republican freshmen, saying they wanted to deal with the deficit now
In the final vote, 186 Republicans favored it along with 85 Democrats. Fifty-four Republicans and 104 Democrats opposed it.
Although this measure is expected to be approved, any future "continuing resolutions" are going to be tough to come by, with fiscal conservatives seeking more spending cuts than President Obama is willing to agree to.
The deficit for February was the biggest one-month deficit in history at $222.5 billion. Federal revenue for the month was $110.7 billion, while spending totaled $332.2 billion according to the latest Treasury Department figures.
Early refunds go out in February while filers have just begun to filter into the revenue side of the equation. As indicated below this fiscal year 2011 is expected to show that the government will end the year with the largest deficit in history at $1.65 trillion dollars.
(3/11/11)- The Senate approved the continuing resolution, as proposed by the House, that will keep the government running through midnight March 18 and President Obama signed the bill.
In a report issued by economists at the Pew Center on the States and the Nelson A. Rockefeller Institute of Government, it was concluded that states overestimate their tax revenue during tough economic times, and thus have to face the consequences when those estimates prove to be too rosy.
The authors of the report concluded that during the depth of the latest recession in 2009, income forecasts by all 50 states overshot reality by a total of $49 billion.
The median state overestimated by 10.2% in the recession of 2009, while during normal economic times the median revenue estimat was under by 1.5%, leading to a $10 billion surplus nationally.
(3/2/11)- The House approved and sent on to the Senate a 2-week continuing resolution yesterday that will keep the governmental operations open through midnight March 18, as we discussed in our item dated 2/28/11 below.
The proposal that the House approved contained $4 billion in spending cuts, and the president is expected to sign the measure once the Senate approves it.
(2/28/11)- The latest press reports indicate that the Republicans and Democrats are close to agreeing to a compromise that would extend the timeframe beyond the March 4 midnight deadline for the continuing resolution that would keep the government operating for at least another two weeks, or until midnight March 18.
Under the proposed compromise to extend the March 4 deadline there would be a total of $4 billion in spending cuts. A saving of $1.2 billion would result by ending eight education, transportation and other programs that President Obama had previously sought to close down. Another $2.8 billion would be saved by eliminating earmarks in the current budget.
The House is expected to approve the temporary measure on Tuesday, with the Senate acting shortly thereafter so that the proposal could reach the president shortly before the expiration date of March 4 midnight Friday.
(2/26/11)- Just how serious are the budget shortfalls that the states are projecting for their fiscal year 2012 budget shortfalls? Are there any states that are not projecting budget shortfalls for their fiscal year of 2012 budgets?
According to data from the Center on Budget and Policy Priorities there are only 4 states in the Union that are not projecting budget shortfalls. They are Alaska, Arkansas, North Dakota and Wyoming. Estimates are not in yet from Alabama, New Hampshire and Tennessee. All other states are projecting shortfalls that will have to be dealt with in the coming months.
There are a total of 10 states that are projecting shortfall for their fiscal year of 2012 at 20.0% or greater. They are Nevada (45.2%); Illinois (44.9%); New Jersey (37.4%); Texas (31.5%); California (29.3%); Oregon (25.0%); Minnesota (24.5%); Louisiana (22.0%); Connecticut (20.8%) and North Carolina (20.0%).
President Barack Obama's 2012 budget proposal projects this year's federal deficit will reach $1.6 trillion, the largest deficit on record. The Congressional Budget Office (CBO), the nonpartisan arbiter of fiscal matters recently had estimated that the budget deficit for the fiscal year of 2011-12 would be $1.48 trillion.
The budget deficit in fiscal 2010 was $1.3 trillion.
Social Security, Medicare and other entitlement programs will consume about 60% of all federal spending, not including interest on the debt next year, or $2 trillion according to the CBO. By 2012 it is estimated it will devour 68%, and cost $3.3 trillion according to the CBO figures.
(2/10/11)- The "continuing resolution" that will keep the federal government operating in the absence of a budget is due to expire on March 4, 2011. Under the terms of a continuing resolution, governmental agencies can only spend the same amount as they spent under the fiscal 2010 budget.
The debt ceiling is $14.3 trillion, and the Treasury Department now estimates that the country will reach that level sometime between April 5 and May 31, depending on the state of the economy, tax receipts and other factors. The Treasury could extend that date by a few months if it wants to borrow from some of the other government accounts that are available as it has done some times in the past.
Right now we are about $200 billion shy of the $14.3 trillion level.
There has been a lot of media attention paid to the fact that states are faced with huge budgetary deficits, and even the specter of bankruptcy has been brought up. On the other side of the ledger we have the fact that state tax revenue grew at the fastest rate in nearly five years during the fourth quarter in 2010.
State tax collections increased 6.9% in 41 states that have reported their revenue, according to a report issued recently by the Nelson A. Rockefeller Institute of Government at the State University of New York. If that pace holds once the other states report their numbers, that will be the fastest rate of growth since the second quarter of 2006.
Income tax collection rose at the rate of 10.7% in the 41 reporting states, including California where the percentage income-tax increase was 32%
Corporate income taxes were the fastest growing category in the quarter, rising 14.8%. State sales taxes also grew nicely at the 6.0% rate.
One of the biggest problems that the states now face is the fact that about $150 billion in stimulus aid from the federal government will no longer be able to help the states. Build America bonds, which also helped to ease the financial burden for many states will no longer be available with their federal subsidy for the states.
(1/31/11)- The Congressional Budget Office (CBO) has increased its August estimate of the budget deficit by $414 billion to nearly $1.5 trillion for the federal fiscal year of 2011 that ends on September 30, 2011. The deficit was $1.4 trillion in 2009 and $1.3 trillion in 2010. Part of the increase was due to the agreement reached by President Obama and the Republicans on extending the Bush-era tax legislation.
The CBO estimated that the deficit would fall to $1.1 trillion in fiscal year 2012.
The country is nearing its current debt limit of $14.3 trillion, which it is now estimated that we will reach in April. Increasing the debt ceiling will be a major issue that will be fought out in Congress over the coming weeks.
The CBO went on to say "the deficits of $1.4 trillion in 2009 and $1.3 trillion in 2010 are, when measured as a share of gross domestic product, the largest since 1945-representing 10% and 8.9% of the nation's output."
(1/17/11)- The federal government was able to lend over $41 billion to the states, as part of the $787 billion stimulus package that they used to pay unemployment insurance to its residents.
The trust funds that were used by the various states to pay the unemployment insurance had run dry as a result of the recession. They had been hoping that they would be able to repay the loans to the federal government when an improving economy would cause the unemployment rate to fall to more manageable levels.
The loans were to be for a 2-year period of time, which ended December 31, 2010. The interest that is due in September 2011 as a result of those loans amounts to about $1.3 billion.
In an article in the January 15, 2011 edition of the NY Times, entitled "Interest Adds Up to a $1.3 Billion Bill for States" by Michael Cooper and Mary Williams Walsh, the authors point out the dilemma now faced by 30 states.
According to Department of Labor statistics, California owes the biggest interest due at $362 million, with Michigan next at $117 million followed by New York at $115 million
The article goes on to state: "If states are unable to repay their outstanding federal loans by November-which will prove difficult for many- nearly half the states could be forced to effectively raise federal taxes on employers by about $21 per worker, under a provision of federal law that automatically reduces the tax credits given to businesses in states that carry loans two years in a row. Businesses in Michigan, Indiana and South Carolina are already paying the higher federal tax."
Thirty-five states were forced to raise their state unemployment taxes on employers in 2010, according to a survey by the National Association of State Workforce Agencies. The state debts are the highest they have been in the 75-year history of the nation's unemployment program.
(1/7/11)- The latest U.S.Census Bureau figures on state revenues showed that the total revenues for the 50 states came to $1.1 trillion in 2009, down from $1.6 trillion in 2008. This was the steepest drop since the bureau started keeping those records in 1951.
Tax collections fell by $66 billion, but because of the federal stimulus money it resulted in a mere 1.4% decline in general revenues. States paid $66 billion in unemployment benefits in 2009, up from the $35 billion paid the year earlier.
Public welfare spending rose 6.1% in 2009, while spending on parks and recreation fell by 4.6%. Total federal grants to the states rose by nearly 13% to $477.7 billion.
The biggest loss of revenue recorded was the $477 billion drop earned by the pension funds and other social insurance trust funds of the states.
(1/3/11)- Just as the economy as a whole is showing gradual improvement, its effect is being shown in the gradual increase in state and local tax revenues. Combined state and local tex revenues rose 5.2% to $284.3 billion in the 2010 third quarter from the year-earlier period according to the latest figures from the Census Bureau.
In the third quarter of 2009 tax revenues had fallen 5.4% from the third quarter 2008 revenues.
Personal income tax receipts rose 4.8% in the third quarter while sales-tax revenues rose 4%, according to the Census Bureau's data.
On the other side of the ledger, corporate income-tax collections fell 3.3% in the quarter. Property tax revenues rose 7.8% in te third quarter, largely due to tax rate increases that had taken place in the quarter.
The biggest problem facing both state and local governments still lie ahead, namely pension and health-care costs for their employees and retirees.
(12/28/10)- Congress has approved a $250 billion stop-gap spending measure that will keep the government running through March 4. This is the fourth stop-gap measure that has been approved since September 30th, which date is the end of the federal government's fiscal year.
The measure will keep government spending for most federal agencies and departments at levels authorized for fiscal 2010, though some programs will see slight increases. It includes a two-year wage freeze for most federal employees, and it provides emergency financing for some programs, including Pell grant scholarships that would have been reduced or eliminated for more than 400,00 low-income students.
The incoming Congress will also have to deal with the fact that the government's accumulated debt now stands at $13.9 trillion, while the debt ceiling stands at $14.3 trillion.
The measure does not contain money that the Obama administration wanted to start the enforcement of the new Dodd-Frank financial services law, and spending for the new health-care law passed this year.
Republican lawmakers have vowed to roll back federal spending to fiscal 2008 levels without increasing taxes.
The four stop-gap measures, which are known officially as continuing resolutions in and of themselves result in increased costs down the line.
(12/5/10)- In spite of all the headlines about cutbacks by state and local governments, spending is also rising by these same entities. Total spending for all state budgets for fiscal year 2011, which started July 1, 2010, rose 5.3% to $645.1 billion from 2010, according to a report issued by the National Association of State Budget Officers.
This is the first year spending rose since the fiscal year 2008. States, as a whole will still have about $43.2 billion in stimulus money to spend in their fiscal year 2011.
States are collecting more taxes as a result of rising income and sales taxes, and also because they enacted about $6.2 billion in new taxes. State tax revenues in 48 states that have reported their collections grew 3.9% in the third quarter of 2010 over the same period last year, according to a report from the Nelson A. Rockefeller Institute of Government at the State University of New York.
(11/20/10)- The lame duck session of Congress that went into session on November 15th is faced with a deadline of December 2 in order to keep the government funded and operating. The continuing resolution that Congress passed at its last session is due to expire on that date.
None of the 12 separate appropriation bills needed to finance the government for the fiscal year that began on October 1 have been passed. Democratic leaders would prefer to package the 12 bills into one omnibus bill that would provide full-year funding for the government.
Under continuing resolution appropriation bills, the funding for any agency is restricted to the level that it was at under the previous appropriation budget bill amount.
Senior Senate appropriation aides have been compiling an omnibus bill that would total $1,108 trillion for 2011. That is the amount that Senate Minority Leader Mitch McConnell (R., Ky.) said that he would be willing to support.
This amount is about $20 billion less than what President Obama had requested in his budget. It represents a 1-% increase over the $1.089 trillion appropriated for 2010.
(10/18/10)- The Congressional Budget Office reported that the federal deficit for the fiscal year ended September 30, 2010 was slightly less than $1.3 trillion, which made it the second largest budget deficit since 1945.
That figure was only $125 billion less than the record high of $1.4 trillion set for fiscal year 2009.
The deficit in fiscal 2010 was equal to 8.9% of the U.S. gross domestic product, which is well above the long-run target of 3% that is considered by most economists to be sustainable.
(10/11/10)- Total state and local government tax revenue rose 1.7% to $318.2 billion in the three months ended in June versus the same period a year ago, according to the data released by the Census Bureau. It was the third consecutive increase in quarterly tax revenue, with growth across most major categories, including sales and property tax.
Individual income taxes grew only 0.01% to $75.9 billion in the second quarter, which was about the same amount collected in the second quarter of 2005.
Sales tax grew about 5% in the second quarter, which was about at the same level it was at in the second quarter of 2006
Property tax revenue rose 3.3% in the second quarter, compared with its fall of 2.4% in the same quarter last year.
Corporate income taxes fell 18.3% in the second quarter to $15.2 billion.
State revenue collections peaked in the 2008 fiscal year with only three states expecting to reach that level this year, according to a survey of the states by the National Conference of State Legislatures.
(9/6/10)- For the fiscal year 2009-2010 total interest paid on the debt of U.S. fixed income obligations held by the public fell 22% to $189 billion, even though the amount of debt outstanding increased 30% to $7.6 trillion, according to the latest audit by the U.S. Government Accountability Office.
(9/1/10)- According to the latest report from the Nelson A. Rockefeller Institute of Government at the State University of New York, tax revenues increased 2.2% in 47 states that have reported their receipts for the three months ended June 30, compared with the same period a year ago
This is the second quarter in a row that the revenues increased, after having decreased for 5 quarters in a row before that.
Second quarter sales-tax revenue increased 5.9% in the 47 states included in the survey, while personal income taxes grew 1.6% Corporate income taxes continued to decrease, with the decline being 19% for the quarter.
Thirty of the 37 reporting states had revenue increases for the quarter.
(8/17/10)- The House came into a one day session last week to pass the Senate appropriation bill of $26 billion passed the prior week. The bill contained aid to school districts and to the states so that they may be able to reduce their Medicaid expenditures. The vote was 247 to 161 in favor of the legislation, which was then sent on to President Obama, who signed the bill.
Only two Republicans crossed party lines to support the measure, while 3 Democrats opposed the bill.
(8/5/10)- New York State's legislature finally passed a budget on August 3rd, which was 125 days late. It came close to approaching the latest passage of a budget in the state that took place on August 11th, 2004.
Yes it is true that because of a recent change in the state's law, the legislators were not getting paid until a budget was passed, but that certainly had no affect on speeding up the process.
The vote in the state Senate in favor of passage of the budget was strictly by a party-line vote of 32 Democrats to 28 Republicans. The New York House of Representatives had passed the budget earlier, and Governor David Patterson said that he would sign it.
The budget was required by law to fill the $9.2 billion deficit that the state was running.
(8/4/10)- Now come the cities reporting in with record deficits. The city of Chicago is projecting a $654.7 million deficit in its proposed budget for 2011, the largest shortfall in the city's storied history.
The projected deficit equals nearly 20% of its proposed general-fund budget of $3.39 billion
(7/31/10)- Of the forty-one states that had budget gaps going into the 2011 fiscal year that started this month, many have been closed through a combination of budget cuts and tax increases, according to a report from the National Conference of State Legislatures (NCSL). Some states, such as New York have still not been able to pass their fiscal 2011 budgets
The good news is that for the first time in two years, state governments are expecting tax collections for the coming year to grow. The report went on to state that most states are still likely to face at least two more years of financial stress.
Many states are counting on the federal government to extend the special Medicaid payments that were part of the 2009 stimulus package. The stimulus package brought increased federal payments towards the cost for Medicaid, and many states are depending on this to continue.
Congress still has not resolved the question as to whether or not the federal government will continue to pay more for Medicaid, and thus reduce the amount that the states have to contribute towards the cost. The NCSL report estimated that it looks like the states that have announced their 2012 and 2013 budget estimates, are facing a $136.4 deficit.
(7/28/10)- Administration officials increased their estimate of the size of the federal deficit for the fiscal year that begins Oct.1, 2010 to $1.4 trillion or 9.2% of the economy.
This projection was an increase from the previous projection of $1.267 trillion in February. Over 10 years, the White House projected a total of $8.5 trillion deficit, a slight decrease from its previous estimate.
The White House estimated that unemployment would stay high, falling only to 8.1% in 2012. The new health-care law passed this year is expected to add $51 billion to the debt between now and fiscal 2012.
(7/15/10)- Maybe, just maybe it is beginning to turn!!! For the first time since the onset of the recession, states had an increase in revenues for the first quarter this year that were greater than the revenues for an equivalent period of time in the prior year.
State tax revenues rose 2.5% to $164.5 billion according to an analysis of Census Bureau data released by the Nelson A. Rockefeller Institute of Government at the State University of New York. Preliminary data for April and May from 42 states indicate that second-quarter revenue increased less than 1% according to the Institute.
The first-quarter gain was led by a 2.5% gain in personal income taxes and a 0.4% increase in sales tax. Corporate income taxes fell 0.6% from a year ago. Most of the first quarter increase came from two states, California and New York., both of which increased taxes to close budget deficits.
Census figures showed that property-tax revenue fell 0.6% to $107.7 billion in the first quarter last year. This was the first year-over-year decrease since 2008.
(6/5/10)- In a report from the National Governors Association and the National Association of State Budget Officers, it was estimated that the states face $127 billion in budget deficits over the next two years.
"States are still below pre-recession levels on everything including spending and tax collections," said Scott Patterson, executive director of NASBO.
States added $23.9 billion in taxes and fees in 2010, and governors have requested raising taxes by an additional $31 billion in 2011, according to the report.
Total.tax collections fell by one-third in Louisiana during the first quarter of this year compared with the same period last year according to an analysis of tax data from a report issued by the Nelson A. Rockefeller Institute of Government. A total of 34 states collected less in taxes during the first quarter of 2010 than for the same period of time last year.
State tax collections grew by 2.4% during the quarter when you take all the states figures together, but that was due mainly to tax increases in New York and California, rather than it being a sign of an economy that was recovering.
(6/3/10)- The state of Pennsylvania became the latest state to come up far short of revenue projections for the month of May. The state is now faced with a $1.2 billion shortfall for the budget year ending June 30th, according to the latest figures from the Pennsylvania State Department of Revenue.
The May shortfall was for $125 million. For the first 11 months of the fiscal year, Pennsylvania has collected $24.6 billion, or 4.8% less than expected for that period as projected by Governor Edward G. Randell's $27.8 billion budget.
The state is required to have a balanced budget to start the fiscal year in July.
(5/18/10)- State tax collections are falling far short of the anticipated rebound in collections that appeared up through March of this year. April is the biggest revenue month for most states because it is when the greatest portion of the residents' income taxes are paid.
Sales tax revenues for the month have not been fully reported, but it is very doubtful that they can make up for the deficiency.
The tax revenue for April came in short of expectations by $3.6 billion; in Pennsylvania by $390.1 million; in Kansas by $65.3 million and in Idaho by $55 million.
Governor Arnold Schwarzenegger has pegged the California budget shortfall at $19.1 billion, and he has called for sharp cuts in welfare and health programs among other items to try and slash the deficit.
In Pennsylvania, the budget deficit grew from $720 million at the end of March to more than $1 billion on May 3. As we point out in our item dated 5/9/10,the Illinois deficit is now at over $13 billion.
Many states are giving thought to the idea of a tax increase, as unpopular as that might seem to the politicians proposing it.
(5/9/10)- Although the California state deficit is larger than that of Illinois, the Illinois deficit is a greater percentage of the gross revenue of the state, so that its $13 billion deficit is even more hazardous than any other state in the Union.
All states except Vermont have at least a limited requirement to balance their budgets, so that with a greatly reduced amount of federal money available from the federal stimulus package, the states and their legislatures and governors are finding themselves in quite a financial bind.
To compound the problem states are finding that their revenues for April-when most tax money comes into the states- is falling far short of what had been expected. Illinois disclosed that for April, revenue fell 15% from the same month a year ago, or $501 million, in part due to a drop of $345 million in federal aid.
As of April 30, federal non-withheld income taxes for April fell 17.6% from the same month a year ago, according to a report from the Nelson A. Rockefeller Institute of Government at the State University of New York.
(4/1/10)- The Recovery Accountability and Transparency Board consists of 13 current federal inspector generals. The board has two missions. Mission one is to discover waste, fraud and abuse in the spending of the $787 billion set up in the federal stimulus package. Mission two is to inform the American public as to how the money is being spent.
The board has an advisory panel, which is headed by Edward Tufte, a professor emeritus of political science, statistics and computer sciences at Yale University. Edward Devaney, the head of the board is the inspector general of the Interior Department.
The Web site recovery.gov has been established so that viewers can see where and how the stimulus money is being spent.
(3/19/10)- State budgetary woes are now making the headlines in the media. At last count, the states were $180 billion in the hole according to the liberal Center on Budget and Policy Priorities, and looking to Washington for some financial help.
About a third of last year's economic-stimulus package went to aid states, but now more than ever, more help is needed. About $90 billion of the stimulus money went to help the states with their costs for Medicaid, and $54 billion for schools and general services.
Illinois is about $12.8 billion in the hole, followed by California which has a shortfall of about $12.3 billion. New Jersey with $10 billion, New York with $8.2 billion, Connecticut with $4.7 billion and Florida with a $4.7 billion shortfall face the largest deficits dollar wise. Nevada with a 59.8* of fiscal year 2010 budget is the highest percentage state budget deficit.
Quarterly payments of Medicaid money are due to end in December, and states will have spent most of their education funds by June.
Realistically, only a helathy economy will be the answer that will pull the rabbit out of the hat. As much as the doomsayers are as pessimistic as ever, the stock market seems to be saying we are on the road to recovery.
(3/3/10)- The latest report from the Nelson A. Rockefeller Institute of Government points out that total state tax collections shrank in the fourth quarter of 2009 for a fifth consecutive quarter, the longest period of continuing states revenue declines since at least the Great Depression.
Lucy Dadayan, a senior policy analyst, wrote the report. In sum, state tax collections fell to $134.5 billion, a 4.1 percent drop from the $140.2 billion collected during the same period last year.
Ms. Dadayan went on to say, "State tax revenue will continue to be insufficient to support current spending commitments, and more spending cuts and tax increases are most likely on the way for many states."
Seven states reported growth in revenues, but the report notes that the gains "were often driven by legislated tax increases rather than growth in the economy and tax base."
The report predicts that more states will begin to see revenue growth soon, particularly as sales tax collections increase, as retail sales rebound.
(2/6/10)- The House voted on Thursday, to increase the debt limit to $14.3 trillion, which meant the increase was $1.9 trillion. Since the Senate has already approved the measure, it will now go to President Obama, who said he would sign it.
With this increase, the accumulated debt now amounts to about $40,000 per person in the United States. The approval vote was 217 to 212, with 37 Democrats voting against the measure along with all the Republicans in the House.
At the same time as the vote to approve the increase was taking place in the Senate, that legislative body also approved new rules that would require future spending increases or tax cuts to be paid for with either cuts to other programs or equivalent tax increases.
If the rules are broken, the White House budget office could force automatic cuts to programs like Medicare, farm subsidies and unemployment insurance. Most other programs, including Medicaid, Social Security and food stamps would be exempt from such cuts.
(2/3/10)- The Balanced Budget Act of 1997 required Congress to either offset any increase in spending for one item in the budget with a cut in spending in another item to balance it out, or an increase in taxes to negate the increased spending. That act was allowed to expire in 2002, even though there has been several attempts to reinstate that principle in one form or another.
President Obama called for a executive commission to examine ways to cut the deficit in his State of the Union message recently, since the Senate defeated a measure for such a commission to be established. The vote in the Senate was 53 to 47 in favor of the establishment of such a commission, which would have had compulsory authority to enforce its recommendations, but a super-majority vote of 60 senators in favor was required for the measure to be passed.
The commission that the president appoints must report back to him by yearend with its recommendations, which would require congressional approval before the recommendations could be enforced. The Senate would vote on the recommendations first, and if passed by at least 60 to 40, the measure would then go on to the House to be acted upon.
The Senate did pass a pay-go amendment to the increase in the debt ceiling limit to $14.3 trillion (an increase of $1.9 trillion) by a super-majority vote of 60-40 that mandated that Congress offset the cost of expansion of entitlement programs like Medicare with tax increases or spending cuts to avoid adding to the deficit.
(1/30/10)- The latest report from the Congressional Budget Office (CBO) estimated that the projected deficit for the fiscal year that ends September 30, 2010 would be $1.3 trillion. This works out to be about 9.2% of the gross domestic product.
The federal fiscal deficit for the year ended September 30, 2009 was $1.4 trillion, which was nearly 10% of the gross domestic product. The CBO estimated that interest payment for the federal government would be about $207 billion this year.President Obama's budget estimated that the deficit for the next federal fiscal year would be $1.6 trillion, which he hoped could be cut to a $800 billion deficit by fiscal year 2013.
In the face of these numbers, we can only appreciate how fortunate the federal government is that interest rates are at the extremely low levels that they are at today.
(1/24/10)- The Senate voted on a proposal to wind down the $700 billion Troubled Asset Relief Program, and at the same time voted 53-40 on an amendment to a bill to increase the debt ceiling by$1.9 trillion to $14.3 trillion.
A Senate rule requires a 60-vote majority to pass any amendment to a bill, so that the matter is still pending.
We are all aware of how difficult and contentious President Obama's attempt to reform health care in this country has been. Please keep in mind that in just seven years from now, in 2017, the Medicare hospital insurance fund will be exhausted. Looming down the road is the fact that the Social Security Trust Fund will also become exhausted a few years thereafter.
(1/6/10)- The U.S. Census Bureau reported that state and local tax revenues fell 7% in the 3rd quarter of 2009 from a year ago. Sales taxes declined 9% to $70 billion in the third quarter compared with the year-ago period. Income taxes dropped 12% to about $58 billion.
Sales and income taxes make up roughly half of state and local tax revenues. Strangely enough property taxes increased by 3.6% in the third quarter compared with a year ago, but this revenue figure will drop off sharply as property assessments plunge and residential and commercial property values drop sharply.
All this adds up to more cutbacks by state and local governments. Interest rates are expected to rise in the coming months, and disbursements from the federal stimulus package will begin to abate. Governmental services will be sharply curtailed and even eliminated.
The only bright spot on the horizon is the fact that because of the sharp rally in the stock market since March 9, 2009 relief may ultimately be on its way. Repayments will be made to the federal government of many of the loans to financial institutions, and the economy is expected to slowly and unevenly emerge from the recession of 2008-2009.
Only three states saw increases in third quarter revenues. They were Nevada, New Hampshire and Rhode Island. Alaska saw the biggest decrease in revenues at 65%, but that was due mainly to the sharp drop in the price of oil.
(12/30/09)- The U.S. Senate approved a $626 billion Pentagon spending budget and separately approved and also sent on to the president a short-term increase in the federal debt limit. Since the House had already passed these measures, this finishes the work that the legislature had to do before they re-convene on January 19th, 2010. The president has signed both measures into law.
The federal government's current debt limit was $12.1 trillion that is expected to be broken shortly. The $290 billion increase that passed by a vote of 60-39 will keep the government operating through February, 2010, and then Congress will have to act on the matter once again..
A bipartisan group of 31 senators sent President. Barack Obama a letter urging him to join them in backing an 18-member commission to be made up of lawmakers and two administration officials. The commission would have the power to recommend legislation to Congress to help reduce the deficit.
The defense bill, which passed 88-10, sets military spending for the remaining 10 months of fiscal 2010 the federal fiscal year. It does not include funds to pay for the extra 30,000 troops President Obama said he intends to send to Afghanistan next month
In addition, the bill postpones for two months a 21% scheduled cut in Medicare payments to doctors..
(12/14/09)- Congress has passed and sent on to the president a 1,088 page, $1.1 trillion spending bill, which covers the government's annual appropriation for fiscal year 2010. The measure combines $447 billion in operating budgets with about $650 billion in payments for federal benefit programs like Medicare and Medicaid.
The spending bill combines six of the 12 annual appropriation bills for the 2010 budget year that began Oct. 1. Obama has signed into law five others.
The final one, a $626 billion defense bill, will be used as the base bill for another catch-all package of measures that Congress must deal with in the coming days. Those include action to raise the $12.1 trillion debt ceiling and proposals to stimulate the job market
The measure provides for spending increases averaging about 10% to programs under the immediate control of Congress. This increase percentage is far in excess of the rate of inflation, and it also contains 5,244 earmarks totaling $3.9 billion, according Taxpayers for Common Sense, a watchdog group in Washington.
(10/28/09)- Under the current Medicare law, physicians are faced with a 21% cut in their scheduled Medicare fees in 2010, and then, annual cuts of 5% for the next several years. The formula traces back to Medicare laws passed in 1989 and 1997, and were aimed at keeping Medicare spending in check.
There has never been a reduction in doctor's fees as required by the law, because Congress always passed "doc fix" laws increasing the yearly fees, for fear that physicians would leave the Medicare program.
Democrats in the Senate had hoped to pass a law, separate from the health-care legislation pending before Congress, that would have called for an increase in Medicare spending to physicians of $247 billion over 10 years. The bill, S.1776,was introduced by Senator Debbie Stabenow (Dem-Mich), but was defeated by a vote of 53 to 47 in a roll call vote last week.
A dozen Democrats and one independent joined 34 Republicans in voting against the bill. The purported reason for voting against the bill was that there were no offsetting reductions in spending as against the increase of $247 billion in outlays. An attempt was made to cut the time frame to a one year increase as opposed to the 10-year time frame, but this measure was also defeated.
President Obama has gone on record as saying that his health-care proposals would add no more than $900 billion to the deficit, and any attempt to charge an expense outside the legislation is not appropriate in the eyes of fiscal conservatives.
(10/25/09)- The Treasury Department reported that the federal deficit for the fiscal year ended September 30th 2009 came in at about $1.4 trillion, or about 10% of the U.S.'s gross domestic product. This deficit, even though it was down about 24% from earlier projections, was the largest deficit since World War II.
The Treasury said government receipts were down 16.6% in fiscal year 2009 to $2.1 trillion, whereas spending increased more than 18% to $3.5 trillion, including $113 billion in stimulus spending. The stimulus package that was passed last year called for a total of $787 billion in stimulus spending.
(10/4/09)- With time running out on September 30th, the Senate by a 62 to 38 vote passed the stopgap measure that had been passed by the House on September 25th, as shown by our item dated 10/1/09 below. The measure maintains federal spending at the present levels with some exceptions as stated below.
None of the needed 12 annual spending programs have been passed by Congress yet.
(10/1/09)- The House on September 25th passed legislation to head off a government shutdown by temporarily extending spending on most federal programs at current levels. The legislation was tacked on to a $4.7 billion House-Senate compromise bill that will finance Congress' own budget.
The one-month stopgap measure, approved by a 217 to 190 vote, is needed because Congress failed to complete work on any of the 12 annual spending bills required to keep the government running.
The measure would extend financing for the operating budgets of Cabinet departments and other agencies at current levels through October 31. An exception would be made to provide more money for the Census Bureau, which is preparing for the 2010 count and for veterans medical programs.
The measure would also allow the Postal Service to delay $4 billion in payments due next month to a health care fund for retirees. About $5.4 billion is due to be paid into the Retiree Health Benefits Fund, but Postal officials say they do not have enough money to make the payment.
The measure would also extend the federal highway program for one month. Congress is working on a 3 month extension.
(9/15/09)- According to Treasury officials, the August federal deficit came in at $111.6 billion, which was slightly less than the estimated $118 billion that analysts had expected. This is the amount that receipts fell short of outlays for the month.
(9/5/09)- The Congressional Budget Office, the Congressional overseer of the budget numbers, revised its May deficit projection of $1.84 trillion for the present federal budget which ends September 30th to $1.58 trillion. Spending will rise by 24% this fiscal year, the largest increase since 1952 when the Korean War was about to wind down.
This means that the deficit will be at 11.2% of the gross domestic product, a level not seen since 1945. It estimates that the deficit will improve only slightly in the 2010 fiscal year to $1.5 trillion.
The Obama administration's Office of Management and Budget raised its 10-year tally of deficits expected through 2019 to $9.05 trillion, nearly $2 trillion more than it projected in February, though as we all know, predicting 10 years down the road is a useless act of crystal ball gazing.
(8/2/09)- The U.S. Treasury Department announced that the government's annual deficit reached almost $1.1 trillion by the end of June 2009. The Obama administration in May estimated that the annual deficit would hit about $1.84 trillion by the end of the fiscal year on September 30, 2009.
In February, the administration had estimated that the deficit would be $1.75 trillion by fiscal yearend. The administration also revised upwards its deficit estimates for 2010 and 2011, to $1.26 trillion and $929 billion, respectively.
By historical standards, the 2009 deficit, at 13% of the country's gross domestic product, would be the biggest since the end of World War II in 1945, when it reached 21.5%.
(7/26/09)- States' tax revenues fell 11.7% in the first three months of 2009, the steepest decline on record. For the 45 states that have reported their tax collections for April and May, it has been a decline of 20% compared with the same period a year ago, according to the report from the nonprofit Nelson A. Rockefeller Institute of Government.
The recession has cut into just about every revenue source. States' collections of corporate income taxes were down 18.8% in the first quarter, compared with a year ago; personal income taxes dropped by 17.5%; and sales taxes were down by 8.3%.
State tax revenues are now down to the level that they were in 2005.
(6/29/09)- State-income tax revenue fell by 26% in the first four months of 2009, compared to 2008 according to a survey of states by the nonprofit Nelson A. Rockefeller Institute of Government. The public-policy research arm of the State University of New York conducted the report.
Withholding tax for the first four months was down 6.9% from the same period last year. Only Utah, Alabama and North Dakota posted gains, while Arizona, South Carolina, Michigan, California and Vermont led the decline.
Personal-income tax collections were down by $28.8 billion for the first 4 months of 2009 compared to 2008 for 37 states included in the survey. Nine states do not collect broad-based personal income taxes, while the results for the other states were not available.
(6/9/09)- States face an aggregate budget deficit of at least $230 billion according to the latest estimate from the National Association of State Budget Officers. For most states, that covers the period from July 1, 2008 to June 30, 2011.
That deficit estimate figure is nearly double the $130 billion in federal stimulus funds that states can use flexibly over that 3-year period of time. About $120 billion in further stimulus funding comes with stricter requirements, and sometimes with new costly mandates.
About a quarter of the states saw their economies contract last year, according to the U.S. Commerce Department, and it will be worse this year. Social Security will continue to see its deficit grow, since with the growth in unemployment, less revenue will be coming into the system.
(5/15/09)- The federal deficit is running at $956.8 billion for the first 6 months of the fiscal year that began October 1, 2008, which is nearly 1/7th of GDP according to Wrightson ICAP, a research firm. The Treasury will have to borrow about $2 trillion for the fiscal year.
All this borrowing will mean that the Congressionally mandated debt ceiling of $12.1 trillion will be breached in September. Tax revenues have dropped by 14% in the first half of the fiscal year.
The Congressional Budget Office expects interest payments alone on the federal debt to more than quadruple in the next decade to $806 billion in 2019 from $172 billion in 2009r.
(5/8/09)- Congress has passed a $3.5 trillion budget outline for 2010, that includes $530 billion in basic spending for domestic programs. President Obama released a more detailed budget plan on, May 6 that we will add on to this article when available..
The House approved the budget outline by a 233-193 vote, with no Republicans voting for it, and 17 Democrats voting against it. The Senate vote was 53-43 with four Democrats voting against it, including Sen. Arlen Specter of Pennsylvania who recently switched to the Democratic side of the aisle
The Democrats feel that under their budget outline, the budget deficit would fall to$523 billion, or 3% of GDP by 2014.
The U.S. Treasury Department reported that the deficit for the first half of the government's fiscal year for 2009 was $956.80 billion.. For the fiscal year 2008, which ended September 30, 2008, the total deficit was $454.80 billion.
The Congressional Budget Office (CBO) estimates that the deficit for the 2009 fiscal year ending September 30, 2009 will be at about $1.8 trillion, or 12.5% of the Gross Domestic Product (GDP). The components of the GDP are consumption; government spending; net exports; and capital investments.
Many economists are fearful that the huge stimulus programs initiated by the Obama administration will put this country at such unbelievably high deficit levels, that it will mean our grandchildren's grandchildren will be faced with financial crises for the rest of their lives. We at therubins on the other hand believe, that this massive stimulus spending that is going on right now is the only way to bring us out of this dire economic situation that we face now, and will result ultimately in big profits for the government down the road.
(3/18/09)- By a vote of 62-35, the Senate passed and sent on to President Barack Obama a $410 billion spending bill that will fund the government for the balance of the federal fiscal year which ends on September 30, 2009. The government has operated on a temporary-spending budget, which has been extended for various periods of time since the last budget expired on September 30, 2008.
Eight Republicans supported the measure, thus enabling the bill to finally pass. The president signed the bill, even though he objected to some of the items in the budget bill. The new budget represented an 8% increase over last year, and included some new items, such as spending on the war in Iraq and Afganistan, which were taken as "off budget" items in the previous administration's budget.
The bill contains an increase of $335 million for the FDA, which is hoped will help that agency deal with the many problems that have come to the forefront in the last few years.
(7/24/08)- The House passed and sent on to the Senate the bill that would allow the government to extend aid to Fannie Mae and Freddie Mac that we discussed in our item. The measure now goes before the Senate, and if passed by that legislative body will be signed by the president, who is no longer threatening to veto the legislation. The measure also contains a provision for the federal government to extend aid for homeowners faced with mortgage foreclosure.
(7/23/08)- As this country's economy continues to struggle, Congress and President George W. Bush have legislation pending that deals with whether or not the federal government should help Fannie Mae and Freddie Mac, the two major mortgage dealers who are presently in crisis mode. Combined, these two companies hold over $5 trillion in mortgages that could be endangered if they fail.
Almost all major U.S. financial institutions own debt obligations of one or both of these companies. Neither or them is an actual federal agency, although they have been frequently called "quasi" governmental agencies.
There is pending legislation before both the House and the Senate that deal with how to assist these companies while they are in this present crisis situation. Both Henry Paulson, Secretary of the Treasury and Ben Bernanke, head of the Federal Reserve Board favor legislation that would help both Fannie and Freddie on the near term.
The Congressional Budget Office, an independent office of Congress, estimates that the rescue package can cost anywhere from zero to over $300 billion dollars. Strict fiscal conservatives want to set a figure for the cost because under the Balance Budget Act of 1997, Congress must offset any increased budgetary spending by either cutting an equal amount of spending, or increasing taxes to match the increased amount to be spent under new legislation.
Even though we at therubins favor fiscal restraint there are times when we have to look at the pluses and minuses of each situation before strictly interpreting the Balanced Budget Act. We will attempt to look into the crystal ball and give our educated determination as to what Congress will do to help these two companies.
We think that the House will pass the legislation today that will enable the U.S. Treasury to take control of the situation for the next 12 months (not 18 months as requested by Secretary Paulson) in order to help Feddie and Frannie in whatever way they need the help. Included in their version of the bill, there will be a provision to help individuals who have defaulted on their mortgages or are close to doing same to the extent of a $2 billion package (not $4 billion as many of the Democrats are now asking for). The Senate will go along with the House measure on either Thursday or Friday.
Even though the president will threaten to veto the message, he will accept it for the good of the economy, and not veto it. The pay-as-you-go requirement of the Balanced Budget Act will not be adhered to, just as it is not being adhered to in connection with any other national emergency legislation.
(8/4/99)- We will continue to update this article whenever significant developments warrant it. It may mean that this article will become very lengthy, but we feel it is important that all the developments be written about in one place, so that you may be better able to understand the complexity of the issue. Of course you can always say lets abandon the Balanced Budget Act of 1997 and go back to our old ways. So what if we go into deficit spending. That way everybody can have whatever moneys they need, because the expenditure is necessary and for a very good cause. We will present the facts; you make your own decisions.
At the end of this article we discuss the fact that the CBO is now projecting a non-Social Security budget surplus. Congress is due to adjourn on August 6 and so far no budget for fiscal year 2000 has been passed. The original Republican plan called for an allocation of $270 billion for the military and $268 billion for all other spending. This is the amount that remains unallocated of the $1.75 trillion budget after payment for mandatory programs and spending. The Defense Department was to receive $19 billion more than it did for the fiscal year 1999, while domestic spending was to be cut $26 billion from the amount it received in the fiscal year 1999.
According to John Feeherty, a senior aide for Speaker J. Dennis Hastert, " we're going to trim off some of the allocations for Defense, Treasury, the legislative branch, and feed some of that back". The exact details of the changes proposed have not been released, but we will advise you of it as soon as it is released.
On January 25th, 1999 the U.S. Supreme Court, in a 5-4 vote, ruled that the Census Bureau could not use statistical sampling to determine the population counts for purposes of allocating seats in the House of Representatives among the states. This ruling is now coming back to further demonstrate the difficulty in maintaining a balanced budget. On Tuesday, June 1,1999 Jacob J. Lew, Director of the Office Management and Budget wrote to the Congressional leaders of the House and Senate appropriations committees to advise them that an additional $1.72 billion would be needed to conduct the year 2000 census. Incidentally, this would bring the cost of the year 2000 census to $6.99 billion up from the $2.6 billion spent on the 1990 census.
The increased estimate is 60% more than the administration had budgeted for the task. The Senate Appropriation Committee has allocated $32.2 billion in budget authority for the bill that includes the census, which is already $300 million less than appropriated for the current year. The House Appropriations Committee has allocated $30.5 billion, so it is already at a lower figure than is the Senate.
If the $1.72 billion is allocated we then have to contend with the Balanced Budget Act of 1997 because we then will need $1.72 billion taken from somewhere else to offset this increase. Where will this offset come from?
If you had a 13% mortgage and could refinance it for 6% wouldn't you want to refinance it at the lower rate? This strangely as it may sound shows you how complex the issue is, in connection with preserving the Social Security surplus for the Social Security system. An article written by David Wessel in the Wall Street Journal edition of June1, 1999 entitled " Treasury Edges Toward Bond Buybacks" delves into this issue.
In one of the latter paragraphs of this article we pointed out the fact that the Government has reduced sharply the amount of bonds, bills and notes that they have issued, since our debt has been reduced substantially by our surplus. In the last quarter alone the amount of debt held has been reduced by $116 billion. With the lower amount of borrowing, and therefore the lower the supply available, interest rates had fallen until very recently. Since March 1997 the amount of marketable government securities in private hands has fallen by $300 billion.
On Wednesday August 4, 1999 the U.S. Treasury announced that they would proceed with their plans to hold reverse auctions to help retire higher coupon U.S. Treasury obligations as we discuss in this article below. Although this will mean that the amount of the budget surplus will be reduced by the amount of the premium paid for the surrendered bonds it has long term beneficial implications that outweigh the negatives.
Now the U.S. Government has a great deal of high interest bonds outstanding, which were issued in the days of higher interest rates of the 1970s, 1980s and early 1990s. These bonds are non-callable meaning that you can not be forced to surrender these bonds before maturity. There is a procedure called a reverse auction that may be invoked to induce the bondholders to voluntarily surrender their bonds. It is called a reverse auction because the government would be buying the bonds from the holders instead of the normal auction procedure wherein the government issues the bonds. In order to induce the bondholders to surrender their bonds the government would have to offer the holders some inducement to accomplish this. This is called offering a premium to induce the surrender. Federal auditors would classify this premium as an extra interest expense immediately and thus the size of the surplus would be reduced by this amount. This procedure would involve billions of dollars to have a meaningful impact and yet that would mean that less of a surplus would be available to be used to balance the budget. No offset would be required in this situation unlike some of the required offsets under the Balanced Budget Act of 1997. Future predictions of surpluses would be increased because of the interest savings.
The Treasury will put the issue before the White House National Economic Council before issuing any of the required regulations in connection with this matter. Again we take no sides in this issue, but feel that bringing this matter to your attention will further help you at arriving at your own decision.
We continue to add paragraphs to this article because of the newsworthiness of the evolving issues that are becoming more and more complicated. Because of the divergent issues involved herein, we may face another governmental shut down because of these budgetary complications. Emergency and/or temporary spending bills may be needed once again to keep the government running.
The House of Representatives recessed on Thursday, May 28, 1999 without
passing the $288.8 billion defense authorization bill. The night before the
Senate had passed its version of the bill by a huge 92-3 majority. Some
Republicans want to add $8.3 billion to President Clinton's defense request,
but others are opposed to it. Complicating matters is the fact that the House
bill, as drafted by the House Armed Service Committee, would bar use of the
money for the war. It would require President Clinton to come back to Congress
for additional funding approval for actions in connection with the war after
September 30th. Speaker Dennis Hastert tried to have this restriction
eliminated from the bill but conservative Republicans opposed to the war
blocked his efforts. You must also remember that under the Balanced Budget Act
of 1997 if spending is increased in one area, compensating cuts must be made in
other areas. If you add to defense spending you may be negatively impacting the
solvency of Social Security by utilizing some of its surplus as the offset.
With each passing day it is becoming more and more obvious that the budgetary conflict between Security and Social Security is widening instead of narrowing. On May 26th, 1999 the U.S.Senate, by a vote of 60-40, rejected the Administrations request to close down more military bases. Secretary of Defense William S. Cohen and the Pentagon estimated that $2-3 billion could be saved through base closings with no appreciable impact on our military preparedness. The General Accounting Office had agreed with this estimate. Sen. John McCain (Rep.-Ariz.), Sen. Charles S. Robb (Dem.-Va.) and Sen. Carl Levin (Dem.-Mich.) had introduced the base closing legislation. With the spending caps in place from the 1997 Balanced Budget Act it is beginning to look like we may have a budgetary impasse once again. The shortfall is almost $30 billion and Social Security and Medicare look like the cash cow that will be used to make up the deficit under the caps.
As the budgetary process continues to evolve we are now seeing another promise that was made by many of our Congress people fall by the wayside. In the latter part of this article we articulate how the promise to not touch Social Security and Medicare funds, while at the same time preserving and enhancing the solvency of these systems, is being broken. It now looks like the promise of no new taxes will also be broken. Instead of calling it a "tax" they are calling it a "fee".
To make up for the increases in military spending the Senate Appropriations Committee is calling for spending for the Federal Aviation Administration operations to be limited to $5.75 billion, or almost $300 million less than requested under the president's budget request. To make up about $200 million of the loss the FAA would be permitted to impose new fees on air carriers to pay for the agency's costs in operating the air-traffic-control system for trans-oceanic flights. Guess who in turn will pay for these new "fees"?
In addition the Army Corps of Engineers construction spending would be cut by over $300 million from current levels. This will result in some serious cutbacks to several water projects out West. Over $90 million would be cut from projects to protect the ecosystem in Florida, California and the Pacific Northwest.
In the Energy Department funding, about $600 million more will be allocated
to the military portion, while taking away that same amount from the
non-military portion thereof.
"Weapons Makers Seek Rise in Pentagon Spending " is the title of an interesting article in the N.Y.Times issue of Wednesday, May 19, 1999 written by Leslie Wayne. The main reason we began this site was our " hope that as a result of reading these articles you will be able to make a more informed decision about the problems associated with the elderly". We are not attempting herein to affect your beliefs about the current war going on in Yugoslavia, nor how we should deal with the tyrant President Slobodan Milosevic. The horrible genocide taking place there is certainly being fully covered by your local and national media. The purpose of this article however is to explain the ramifications that increased spending for defense and security will have on the Social Security System. Once you understand the ramifications, it is up to you to make your own decisions on this matter.
The Balanced Budget Act of 1997 mandates that there can be no increased spending in the budget without having a balancing cut therein, so that the budget must remain in balance. It was just a few years ago that the U.S. Government was operating at an almost $300 billion deficit. The U.S. Government is by far and away the largest borrower in the credit market. As the largest borrower the government was creating the most demand. As we got into deeper and deeper debt the lenders would ask for higher and higher interest rates to be paid to compensate them for our weakening credit status. If you lent money to someone deeply in debt you either require more security or a higher interest rate. It had reached the point wherein for each dollar the government raised in revenue, almost 30 cents had to be paid to cover the interest service being paid on the debt. Thus only 70 cents was left for operating the government.
There are two basic reasons why interest rates have been dropping over the
last few years. The combination of low inflation and less borrowing by the U.S.
Government are the driving forces behind this lower interest rate environment.
Although the Federal Reserve Board has just indicated a bias towards higher
interest rates we must wait to see how this will play out for itself. Ask the
average stock market investor how he has enjoyed this low interest rate
environment and he will surely smile.
We will now come back to the core of our problem caused by the potential conflict that arises from increasing spending for the military and helping insure the solvency of the Social Security System. Military spending has decreased by about 70% since the late 1980s.
Many people have felt that the combination of base closings and cutbacks to the military have weakened the military power of the United States much more than was necessary. Thus the Administration of President Clinton requested $112 billion in additional military spending over the next 5 years.
Weapons procurement would be increased from $44 billion in 1998 to $53 billion in 2000 and $60 billion in the year 2001. Now mind you, these proposals were announced even before the war in Kosovo and Yugoslavia. Much of the armaments that have been used will have to be replaced. New generations of weapons and planes are more expensive than ever. As of the latest figures about 240,000 barrels of jet fuel and oil products are being consumed daily by the war effort. Incidentally this is one of the reason why we have seen an increase in the cost of gasoline.
Cutbacks in production by producing nations are the other cause for the increase in price. Congress is presently working on a $14.7 billion emergency spending bill, part of which is to cover the cost of the Yugoslavian campaign. This matter is covered in our article The Accurate Numbers as To Social Security and Medicare Solvency.
In updating this article it is now expected that the CBO will show a non-Social Security surplus of about $20 billion for 2000, which is expected to grow to a surplus of $100 billion by the year 2005. According to strict private practice accounting this money should not be used in arriving at a budget surplus The healthier economy of the last 2 years alone has resulted in the increased estimates for the solvency of Social Security from the year 2029 to the year 2034.
The estimate for Medicare has been increased from the year 2001 to the year 2015. Now let us suppose that interest rates rise because of additional borrowing done to pay for the increased military spending. This of course assumes that Congress finds a loophole to get around the Balanced Budget Act of 1997. Will that not mean that the economy will weaken, and that the actuaries will than have to shorten the solvency estimates for Medicare and Social Security?
Then of course there is the other possibility of borrowing from the Social Security Trust Fund. Another possibility would be to cut back on Social Security and Medicare spending and use the additional money for military spending.
We are not even attempting to answer this very difficult question in this article. It is our hope however that in reading this article you can make a more informed decision on this matter.
FOR AN INFORMATIVE AND PERSONAL ARTICLE ON PRACTICAL SUGGESTIONS WHEN SELECTING A NURSING HOME SEE OUR ARTICLE "How to Select a Nursing Home"
by Allan Rubin
updated June 23, 2017