The budget deficit was almost $1.3 trillion during the first ten months of the fiscal year (through July). That’s up from $389 billion at this point last year.
Spending has risen 21% over last year, while tax revenues have fallen by 17%.
CBO estimates that $125 billion of the increased spending and decreased revenues are the result of this year’s stimulus act.
The chart shows the main drivers of the exploding deficit:
Fittingly, the red lines represent the current fiscal year.
As you can see, corporate income taxes are lagging far behind the pace of recent years, as are non-withheld individual tax payments (those payments typically stem from capital gains, other investment income, and business income rather than regular wages and salaries).
Refunds have also increased (denoted by a larger negative figure — i.e., larger cash outflows). Refunds also spiked in the middle of last year due to the first economic stimulus.
The budget deficit was $1.1 trillion during the first nine months of the fiscal year (through June). That’s up from $286 billion at this point last year.
Spending has risen 21% over last year, while tax revenues have fallen 18%.
For the first time in more than ten years, the government ran a deficit in June. June is a big tax-paying month, so it usually records a surplus.
The charts shows the main drivers of the exploding deficit:
If you take budgeting seriously, people sometimes think you are a curmudgeon. When I was at the Congressional Budget Office, for example, we were once denounced as anti-housing because we concluded that increasing subsidies for low-income housing wasn’t free. CBO reached that conclusion using an advanced tool known as “arithmetic”, but some advocates tried to portray it as an anti-housing policy statement.
At the risk of again appearing curmudgeonly, I would like to draw your attention to a provision in the health care reform bill being considered by the Senate HELP Committee. That provision, the Community Living Assistance Services and Supports Act, would create a new program to insure participants against some of the financial costs of disability and long-term care.
I have nothing to say about the merits of this provision, except to note that it has one of the best acronyms in legislative history: the CLASS Act.
I have a great deal to say, however, about the arithmetic of the CLASS Act, because it illustrates just how hard it will be for our legislative process to really pay for health care reform.
On Friday, the House of Representatives passed its climate change bill by a slim margin. The bill’s key feature is a cap-and-trade system for greenhouse gases. That system would set national emission limits and would require affected emitters to own permits (called allowances) to cover their emissions.
The number one thing you should know about this bill is that the allowances are worth big money: almost $1 trillion over the next decade, according to the Congressional Budget Office, and more in subsequent decades.
There are many good things the government could do with that kind of money. Perhaps reduce out-of-control deficits? Or pay for expanding health coverage? Or maybe, as many economists have suggested, reduce payroll taxes and corporate income taxes to offset the macroeconomic costs of limiting greenhouse gases?
Choosing among those options would be a worthy policy debate. Except for one thing: the House bill would give away most of the allowances for free. And it spends virtually all the revenue that comes from allowance auctions.
As a result, the budget hawks, health expanders, and pro-growth forces have only crumbs to bargain over. From a budgeteer’s perspective, the House bill is a disaster.
The following table illustrates how much revenue the bill would raise and compares it to the alternative of auctioning all the allowances:
In interpreting this increase, it’s important to keep several points in mind:
May’s increase was driven entirely by the recent stimulus act. The act provided for one-time payments of $250 to a range of Americans who are beneficiaries of various other programs, including Social Security, SSI, and veterans’ benefits. Those payments more than account for the increase in transfers from 16.9% of personal income in April to 18.0% in May. Continue reading “Stimulus Lifts Government Transfers”
If current trends continue, CBO projects that the level of debt, relative to the size of our economy, will grow to unprecedented levels — and keep going. Within a few decades, the ratio of debt-to-GDP could surpass the peak of World War II.
Last week, the Congressional Budget Office released it’s latest snapshot on the Federal budget. CBO estimates that the federal budget deficit was $984 billion — just short of a trillion dollars — during the first eight months of the fiscal year (October 2008 through May 2009). During the same period last year, the deficit was “only” $319 billion. Why has the deficit been exploding so rapidly? Lower tax revenues and higher spending (yes, that’s obvious, but keep reading).
Last week, the Congressional Budget Office released its latest snapshot on the Federal budget. CBO estimates that the federal budget deficit was $984 billion — just short of a trillion dollars — during the first eight months of the fiscal year (October 2008 through May 2009). During the same period last year, the deficit was “only” $319 billion.
Why has the deficit been exploding so rapidly? Lower tax revenues and higher spending (yes, that’s obvious, but keep reading):
As the chart shows, there have been three basic factors driving up the deficit:
A large number of individual VCs are also departing their firms. And, the Journal notes:
The actual number of exits might be even higher than the trade group’s figures indicate. Venture-capital funds are typically 10-year investment vehicles. That means even if a venture capitalist no longer actively invests, he or she can remain on a firm’s masthead because they have to wind up their investments in older funds.
The article is worth reading in full for its discussion of the factors — weak economy, reduced investment capital, natural turnover, etc. — that are contributing to the decline in venture activity and the departure of individual VCs.
I don’t know how much this generalizes (readers please chime in) but one VC friend of mine reports two other factors that may be driving him and some other successful VCs from the business:
Fittingly, the red lines represent the current fiscal year.
In interpreting this increase, it’s important to keep several points in mind:
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