The federal government kicked off fiscal 2016 yesterday by reporting that its October deficit was $136.5 billion, 12 percent higher than the $121.7 billion shortfall seen in October 2014.
Single-month comparisons can be tricky because of timing differences, but the Associated Press's Martin Crutsinger noted that analyzing the results from this October and last October is an apples-to-apples proposition when he wrote that "In both years, Nov. 1 fell on a weekend, which required the government to mail out November benefit checks in October." But instead of diving into and comparing the two Octobers, the AP reporter devoted the vast majority of his writeup to virtual cut-and-paste regurgitations of previously published news about the 2015 fiscal year and projections for the next two years. He wrote just one sentence directly comparing any of the details in two October statements, and buried it at the end of his report.
Crutsinger's closing sentence read as follows:
Treasury's October budget report said receipts totaled $211 billion for the month, down 0.8 percent from a year ago. Spending for October totaled $347.6 billion, 3.9 percent higher than a year ago.
It would be easy to overreact to one month's news, but the detail, especially that relating to collections, is troubling. It's easy to believe that the AP reporter saved it until the end as he did because he didn't want readers to get overly curious about it.
Again reminding readers that directly comparing the months is valid, October's year-over-year collections decline, though small, is the first such occurrence since February, and only the second such instance since February 2012.
The explanations as to why collections came in lower than a year ago should at least raise some eyebrows:
Notes:
(1) — If things had gone normally, the $6 billion-plus increase in income tax, Social Security and Medicare collections should have led the charge to a much higher overall result. But it didn't.
(2) — Corporate tax collections cratered. This could because of one-time items like a major refund (it's Crutsinger's job to dig in and tell us that instead of rehashing last year). But it's also no secret that corporate earnings — and therefore corporate income taxes paid — have been disappointing in several sectors of the economy, particularly in retail. No one expects that corporate collections are going to fall by the almost 60 percent seen in October during the rest of the current fiscal year, but even if they fall by "only" 20 percent (which has occurred in the past), that would lead to a collections shortfall of about $70 bilion, and begin to push this year's projected deficit perilously close to $500 billion.
(3) — Again it's only one month, but the relatively unusual year-over-year decline in excise taxes could mean that there is less overall economic activity occurring, and that the economy may be sliding downhill — something most economic pundits and analysts still refuse to believe is even a remote possibility.
(4) — The "other" category dropped primarily because collections from the Federal Reserve declined from $9.3 billion to $7.5 billion. The Fed is paying interest on the Treasury debt it purchased during its half-dozen years of "quantiative easing" (i.e., creating money out of thin air). A dirty little secret is that much of this debt is being rolled over when it comes due, because the federal government doesn't have the funds to repay it. Many of the debt rollovers carry lower interest rates than the debt being replaced. As long as QE isn't revived and interest rates stay low, it's likely that these collections, which amounted to $96.5 billion during fiscal 2015 (Table 4 on Page 6 at link), will continue to show declines during the rest of fiscal 2016.
As to October's $348 billion in spending, as mentioned earlier, Crutsinger noted that both October 2015 and 2014 had an extra Friday of disbursements. But he didn't seem to grasp the significance of a a troubling difference:
That shifted $49 billion in payments into October, up from last year's $41 billion payment shift.
In other words, the goverment was pushing out benefits payments at a 20 percent faster rate at the end of October 2015 than it was a year ago.
Why? We don't know. It's the AP's and Martin Crutsinger's job to explain such things. But instead, he and they clearly thought that rehashing last year's results and this year's Congressional Budget Office projections was a more productive use of their resources. No, it wasn't, guys. It irresponsibly wasted our time.
Cross-posted at BizzyBlog.com.
