Washington’s Books for June 2011 – Heading toward a new debt interest record for 2011?

Now that Washington is working overtime to put a bandaid on the debt ceiling issue (as if that’s really going to solve the problem), I thought that I’d do a brief posting on the latest Monthly Budget Review released by the Congressional Budget Office on July 8th, 2011.
The CBO estimates that the Treasury Department will report a deficit of $973 billion for the first 9 months of 2011, down $31 billion on a year-over-year basis.  Fortunately for the government, revenues are about 8.5 percent higher than last year because outlays are also up but only by 4 percent.  The CBO estimates that the deficit for the month of June alone will be $45 billion, down $23 billion from a year ago. 
On the spending side of the ledger, outlays were down $26 billion from the same month one year ago because of a drop in the estimated subsidy cost of loans and loan guarantees, a $30 billion decrease in spending on Department of Education programs and an upward adjustment of $9 billion on the cost of housing programs.  As well, a drop in spending on propping up Fannie Mae and Freddie Mac lowered outlays by a further $11 billion.  On the bad side, spending for net interest on the public debt was up $6 billion and outlays for Medicare and Medicaid were each $3 billion higher than the same month one year earlier.  These last three spending increases are harbingers of things to come.
On the income side of the ledger, total receipts in June dropped by $3 billion on a year-over-year basis.  Individual income taxes and social security contributions were the same as a year earlier.  Net receipts from corporate income taxes dropped by 5 percent or $2 billion in the month of June 2011 compared to a year earlier.
On a year-over-year basis, outlays for the first 9 months of 2011 have climbed by $104 billion and revenues have increased by $136 billion.  Let’s break down the numbers a bit more.  For the first 9 months of 2011 on the revenue side, individual taxes have risen by 24.1 percent, social security contributions have dropped by 5.1 percent and corporate income tax has risen by a paltry 1.2 percent even though profits are far higher than they were in the previous year.  Total receipts for the first 9 months of the year are up 8.5 percent to $1733 billion from the same 9 month period in 2010.  For the first 9 months of 2011 on theoutlay side, net interest on the public debt grew the most, rising by $31 billion or 18 percent from the same 9 month period in 2010.  Spending on the three major entitlement programs also continued to grow with spending for Medicaid up $13 billion (6 percent), Social Security and Medicare combined grew by $33 billion (4 percent each).  In the 9 month period, spending on unemployment benefits was down by $29 billion or 23 percent, rather surprising considering the dismal employment numbers released for the month of June.  The largest drop in spending was on  payments to GSEs (as noted above) which fell from $41 billion to $3 billion.  In large part, it is this drop in support for Fannie Mae and Freddie Mac that is making the government’s books look better than they did in the 2010 fiscal year.  Total outlays for the first 9 months of the year are up 4 percent to $2705 billion from the same 9 month period in 2010.
Here is a table showing the Budget Totals through the first 9 months of fiscal 2011:
If you added in the one time (or let’s hope that it’s one time) $38 billion that is no longer propping up the offending GSEs from 2010, the overall deficit picture looks no better than it did in fiscal 2010.  As well, should the economy soften further, the revenue side of the ledger is likely to look far uglier than it does now, pushing Washington even further toward the red ink abyss.
As I’m prone to do, let’s look at the Debt to the Penny for yesterday…

…and the interest on the debt for the first 9 months of fiscal 2011 along with the historical record…

What is particularly scary is that it looks like we could be well on the way to approaching a record year for interest owing on the debt.  With three months left in fiscal 2011, unless monetary miracles actually do happen, the interest owing on the debt will approach the $460 billion mark, above the $451 billion record set in fiscal 2008. This is most concerning because even a small increase in future interest rates will send the United States into new "interest on the debt territory".  Eventually, the piper will have to be paid and we all know who will suffer the most….and they don’t "work" in Washington.
Let’s hope that those living in the ivory towers of Washington make meaningful progress on cutting the size and influence of government and controlling their spend first and tax later habits…sooner rather than later.

Click HERE to read more of Glen Asher’s columns.

Article viewed at: Oye! Times at www.oyetimes.com

Be the first to comment

Leave a Reply

Your email address will not be published.


Confirm you are not a spammer! *