I wrote a couple of months ago that we were in a relatively calm period before things really started to head south. I think we’re nearing the end of anything resembling calm.
Declining Federal tax revenues will translate into bigger deficits – which will require additional Treasury debt – which will flood the debt market with even more Treasury bills/notes. At some point, the world will say ‘enough’ – and all sorts of unpleasant things will start happening.
John - August 4, 2009
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Nathan's Economic Edge
http://economicedge.blogspot.com/
TUESDAY, AUGUST 4, 2009
Federal Tax Revenues – Cliff Diving and Data Hiding…
Remember what Chris Martensen called good economic data? You know, data that “is not statistically massaged before release, it is not 'sampled' but rather tallied up in its entirety, and it squares up nicely with other good sources of data.”
Good Data
• Sales tax data
• Income tax data
• Truck tonnage moved
• Port shipping container traffic
• Air transport
• UPS, FedEx, and other major shippers' volume
• Corporate Revenues (just added to list)
Well, here’s the data from the top of the list, the only data the government releases that meets Chris’s “good” criteria.
And how’s it looking? Is it down the .7 or even 5% that comes out of the massaged and adjusted data? NO! It’s down, wait for it, 22% year over year for Federal individual tax receipts and it’s down a horrific 57% for Corporate Income Taxes!
Now that’s a crash of revenue, just when our government is RAMPING spending all while simultaneously spending trillions of your dollars to bail out the central banks and pay bonuses on Wall Street!
What will that mean for our deficits? GAME OVER! The math is simply so far from working that there is NO WAY to keep the game going very much longer. You can ignore it, call it looney Tunes, whatever, the math simply tells the truth and cannot lie.
Federal tax revenues plummeting
AP ENTERPRISE: Plummeting tax revenues starve government just as Obama embarks on big plans
By Stephen Ohlemacher, Associated Press Writer
On Monday August 3, 2009, 8:51 pm EDT
WASHINGTON (AP) -- The recession is starving the government of tax revenue, just as the president and Congress are piling a major expansion of health care and other programs on the nation's plate and struggling to find money to pay the tab.
The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion.
Other figures in an Associated Press analysis underscore the recession's impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever.
The last time the government's revenues were this bleak, the year was 1932 in the midst of the Depression.
"Our tax system is already inadequate to support the promises our government has made," said Eugene Steuerle, a former Treasury Department official in the Reagan administration who is now vice president of the Peter G. Peterson Foundation.
"This just adds to the problem."
While much of Washington is focused on how to pay for new programs such as overhauling health care -- at a cost of $1 trillion over the next decade -- existing programs are feeling the pinch, too.
Social Security is in danger of running out of money earlier than the government projected just a few month ago. Highway, mass transit and airport projects are at risk because fuel and industry taxes are declining.
The national debt already exceeds $11 trillion. And bills just completed by the House would boost domestic agencies' spending by 11 percent in 2010 and military spending by 4 percent.
For this report, the AP analyzed annual tax receipts dating back to the inception of the federal income tax in 1913. Tax receipts for the 2009 budget year were available through June. They were compared to the same period last year. The budget year runs from October to September, meaning there will be three more months of receipts this year.
Is there a way out of the financial mess?
A key factor is the economy's health. The future of current programs -- not to mention the new ones Obama is proposing -- will depend largely on how fast the economy recovers from the recession, said William Gale, co-director of the Tax Policy Center.
"The numbers for 2009 are striking, head-snapping. But what really matters is what happens next," said Gale, who previously taught economics at UCLA and was an adviser to President George H. W. Bush's Council of Economic Advisers.
"If it's just one year, then it's a remarkable thing, but it's totally manageable. If the economy doesn't recover soon, it doesn't matter what your social, economic and political agenda is. There's not going to be any revenue to pay for it."
A small part of the drop in tax receipts can be attributed to new tax credits for individuals and corporations enacted in February as part of the $787 billion economic stimulus package. The sheer magnitude of the tax decline, however, points to the deep recession that is reducing incomes, wiping out corporate profits and straining government programs.
Social Security tax receipts are down less than a percentage point from last year, but in May the government had been projecting a slight increase. At the time, the government's best estimate was that Social Security would start to pay out more money than it receives in taxes in 2016, and that the fund would be depleted in 2037 unless changes are enacted.
Some experts think the sour economy has made those numbers outdated.
"You could easily move that number up three or four years, then you're talking about 2013, and that's not very far off," said Kent Smetters, associate professor of insurance and risk management at the University of Pennsylvania.
The government's projections included best- and worst-case scenarios. Under the worst, Social Security would start to pay out more money than it received in taxes in 2013, and the fund would be depleted in 2029.
The fund's trustees are still confident the solvency dates are within the range of the worst-case scenario, said Jason Fichtner, the Social Security Administration's acting deputy commissioner.
"We're not outside our boundaries yet," Fichtner said. "As the recovery comes, we'll see how that plays out."
The recession's toll on Social Security makes it even more urgent for Congress to address the fund's long-term solvency, said Sen. Herb Kohl, D-Wis., chairman of the Senate Aging Committee.
"Over the past year, millions of older Americans have watched their retirement savings crumble, making the guaranteed income of Social Security more important than ever," Kohl said.
President Barack Obama has said he wants to tackle Social Security next year, after he clears an already crowded agenda that includes overhauling health care, addressing climate change and imposing new regulations on financial companies.
Medicare tax receipts are also down less than a percentage point for the year, pretty close to government projections. Medicare started paying out more money than it received last year.
Meanwhile, the recession is taking a toll on fuel and industry excise taxes that pay for highway, mass transit and airport projects. Fuel taxes that support road construction and mass transit projects are on pace to fall for the second straight year. Receipts from taxes on jet fuel and airline tickets are also dropping, meaning Congress will have to borrow more money to fund airport projects and the Federal Aviation Administration.
Last week, Congress voted to spend $7 billion to replenish the highway fund, which would otherwise run out of money in August. Congress spent $8 billion to replenish the fund last year.
Rep. Richard Neal, D-Mass., chairman of the House subcommittee that oversees fuel taxes, is working on a package to make the fund more self-sufficient. The U.S. Chamber of Commerce, which doesn't back many tax increases, supports increasing the federal gasoline tax, currently 18.4 cents per gallon.
Neal said he hasn't endorsed a specific plan. But, he added, "You can't keep going back to the general fund."
BUT WAIT! That’s actually an improvement in Corporate tax receipts… then a funny thing happened on the way to look at the St. Louis Fed’s charts. It seems that this chart series, (FCTAX), the only one that presents federal tax data on the Fed’s site, has stopped reporting data! Below is the same series chart that I posted on April 10th of this year:
That’s right, you can see that corporate tax receipts were down well over 70% at that time!
Now, when that same data series is pulled up, you will find that the data begins in 1996 and ENDS in 2008!
In fact, do a search at the Fed’s site and you will find that all aggregate tax receipt information is suddenly only reported to the beginning of 2008!
Fred Search, Gov't Receipts, Expenditures & Investment
Why would they do that? Oh, go ahead and ask. I can already guess their response… “That data is no longer relevant.” Or, “It was an error and will be corrected [when the recession is over].” LOL, seriously, when they were playing games with the “excess reserves” charts, they came up with all types of excuses and now it’s impossible to know exactly how it’s calculated.
One more time:
The BEA, the BLS, in fact ALL government reports are suspect. All reporting of government statistics should be scrapped. The Fed should be abolished, The central banks and bankers should be removed – as in gone, a new money system should be put in place, there should be a Constitutional Amendment dictating the SEPARATION OF CORPORATIONS AND THEIR MONEY FROM STATE, and finally, there should be a new government agency responsible for collecting and reporting economic statistics and that agency should have a mandate to develop data collection methods that cannot be changed over time and there should also be a mandate to release RAW DATA with every report, there should be absolute transparency in that all the calculations and all collection methods should be easily viewable by anyone. Oh, and NO ONE, not even the President should have access to the information before the public!
POSTED BY NATHAN A. MARTIN AT9:29 AM
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