Treasury Budget Deficit Shrinks in October, Now Only Very Unacceptable

Stock Split ImageThe deficit is shrinking! Politicians will likely try to spin this as good news, because it sounds better than calling it less-bad. It is not good news when you see just how much money we are talking about here. The U.S. Treasury reported on Wednesday afternoon that October's deficit came in $91.59 billion in October. This compares to a $120 billion deficit in October of 2012.

What matters about October is that it is the start of the government's fiscal year. The government's total fiscal deficit in 2013 was $680 billion.

The 24 percent improvement for October is skewed a bit. For starters, the closure was happening. About $8 billion of the improvement appears to be tied to the timing on the calendar. If you factor that in, the improvement was likely closer to 17%.

The Treasury showed that total receipts were up by 8% to $198.93 billion, with that being aided by corporate tax receipts. This was shown to be the best October on record for receipts. Spending was down by 5% to $290.5 billion. It is very likely that much of the spending cuts were tied to the government closure in October, and there is the sequestration as well. Defense spending was down by 8%. Keeping interest rates down at the floor appears to be helping as well: the net interest expense was down 18%.

Having a deficit reduction is a good thing. Unfortunately, that reduction target needs to drop down to zero. An October 31 Treasury statement of the public debt is just unacceptable. The total public debt outstanding is $17.156 trillion dollars. That is broken down by $12.187 trillion debt held by the public and another $4.968 trillion.

The World Bank represents the 2012 U.S. Gross Domestic product (GDP) as being $15.68 trillion and the CIA World Factbook shows the same figure nominally but represents the 2012 U.S. GDP as $15.94 trillion on a more comparable purchasing power parity basis.

Keep in mind that the Federal Reserve's balance sheet in the last week was shown to be $3.894 trillion. The are $1.393 trillion in mortgage-backed securities and $2.12 trillion in Treasury securities. Maybe one day the politicians will simply ask the Federal Reserve to allow that Treasury debt to be negated. Think about that in the years ahead, seriously.

If this is viewed as good news try telling your creditors that you would like to live under the same model that the government uses to operate its finances. Let us know how well that works out.


Filed under: Economy

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