It's pretty hard to dress up a disaster as something less than that, but the Associated Press's Martin Crutsinger gave it his best shot in his report yesterday about Uncle Sam's the May Monthly Treasury Statement, in effect understating the amount and significance of federal government's rapidly deteriorating financial situation.
With the help of dubious handling of last year's stimulus payments in May 2008's Treasury Statement, Crutsinger ignored serious declines in tax receipts from economic activity that are, if anything, accelerating. I'll cover that problem in this post.
Additionally, after only briefly mentioning it last month (noted at the time at NewsBusters and at BizzyBlog), Crutsinger grievously erred in his explanation of how a convenient "accounting change" Treasury implemented in April relating to accounting for its Troubled Assets Relief Program (TARP) has affected the reported year-to-date deficit. That is the subject of Part 2.
Here are key background and receipts-related paragraphs from Crutsinger's report:
The federal budget deficit soared to a record for May of $189.7 billion, pushing the tide of red ink close to $1 trillion with four months left in the budget year.
.... The Treasury Department reported Wednesday that the red ink so far this year totals $991.9 billion. The administration is projecting the deficit for the budget year that began Oct. 1, will total a record $1.84 trillion. That would be more than four times the amount of last year's record deficit.
As a share of the overall economy, the deficit this year would be the highest since 1945, when the government was borrowing heavily to win World War II.
..... At the same time, the economic downturn has cut into tax revenues. The report showed that government receipts total $1.67 trillion through May, down 18 percent from last year. Rising unemployment and struggling businesses have meant a drop in both income and corporate taxes.
..... Under the administration's budget estimates, the $1.84 trillion deficit for this year will be followed by a $1.26 trillion deficit in 2010, and will never dip below $500 billion over the next decade. The administration estimates the deficits will total $7.1 trillion from 2010 to 2019.
Crutsinger conveniently ignored the specifics of May 2009's dive in receipts compared to last year. Here is the full picture, compiled by referring to the last Daily Treasury Statements issued in May 2009 and May 2008:
"Total Receipts from Economic Activity" is the most important line item above, because, short of printing money, that's what funds the government. That number's 31.8% decline in May is very, very ominous.
The 18% decline in fiscal year-to-date in receipts reported by Uncle Sam and repeated by Crutsinger would be worse if calendar 2008's stimulus payments were treated as outlays, which I believe should be the proper treatment:
Looking at economic activity-based receipts on a monthly basis, you can see just how slow, and "progressively" slower, business has been at Treasury's cash collections window:
Looking ahead, June is a month normally dominated by estimated payments coming from both individuals and corporations. Corporate receipts in March and April 2009 before refunds were 42% lower than in the same two months of 2008. April's receipts from "non-withheld" individuals before refunds were 35% lower than in April 2008. Given the current economy, June 2009's dive in collections compared to June 2008 promises to be very, very steep.
As unavoidably dour as Crutsinger's report is, no one reading it will have have any idea that things are really much, much worse.
Cross-posted at BizzyBlog.com.
