Revenue windfall continues to dissipate
This article first appeared on SchiffGold.
The Federal Government ran a deficit last month of $240B. Revenue continues to be at or below levels last year while expenses continue to grow.
Figure 1: Monthly Federal Budget
The chart below shows the month of May historically. This is the second largest May deficit ever, falling only behind May 2020 during the peak of Covid stimulus. As the chart below shows, revenues have dropped significantly YoY since the peak in 2021. At the same time, expenses dropped last year but have bounced back this year.
Figure 2: Historical Deficit/Surplus for December
Looking over the ten years prior to Covid, the May deficit averaged $116B which is less than half the amount this year.
Figure 3: Current vs Historical
The Sankey diagram below shows the distribution of spending and revenue. The deficit represented almost 44% of total expenses.
Figure 4: Monthly Federal Budget Sankey
This is greater than the distribution over the TTM which represents 32% of expenses. This means the budget deficit is clearly getting worse in a hurry.
Figure 5: TTM Federal Budget Sankey
The revenue this year has been shrinking on average when looking over the last three years.
Figure 6: Monthly Receipts
At the same time, expenses continue at elevated levels.
Figure 7: Monthly Outlays
One expense that continues to be a major issue for the Treasury is Net Interest Expense. The chart below shows how it has changed over the last several years. In the latest month, it clocked in just below $600B. This is up from $350B at the start of 2022, less than 18 months ago. The government has added an extra $250B in expenses per year on just debt service.
Figure 8: TTM Interest Expense
The table below goes deeper into the numbers of each category. The key takeaways from the charts and table:
Outlays
Receipts
Total
Monthly and Average Monthly Comparison | Trailing Twelve Month (TTM) Comparison | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Category | Dec 2023 | Dec 2022 | TTM Avg Monthly | YoY % Change | TTM % Change | TTM Ending | TTM Ending | TTM Ending | TTM | TTM |
Outlay | ||||||||||
Social Security | -116.9 | -104.2 | -116.0 | 12.2% | 0.8% | -1,392.0 | -1,243.7 | -1,119.8 | 11.9% | 24.3% |
National Defense | -80.8 | -76.5 | -70.4 | 5.6% | 14.8% | -844.3 | -774.6 | -757.3 | 9.0% | 11.5% |
Health | -77.9 | -78.3 | -74.1 | -0.5% | 5.1% | -889.0 | -909.2 | -835.9 | -2.2% | 6.3% |
Net Interest | -67.8 | -54.0 | -60.9 | 25.5% | 11.3% | -730.4 | -517.7 | -366.7 | 41.1% | 99.2% |
Medicare | -65.2 | -61.8 | -72.1 | 5.5% | -9.6% | -865.5 | -737.0 | -693.8 | 17.4% | 24.7% |
Income Security | -60.8 | -78.5 | -61.8 | -22.5% | -1.6% | -741.8 | -813.0 | -1,670.0 | -8.8% | -55.6% |
Veterans Benefits and Services | -40.2 | -35.1 | -26.1 | 14.4% | 53.9% | -313.3 | -270.6 | -240.2 | 15.8% | 30.4% |
Other | -35.0 | -30.6 | -45.5 | 14.5% | -23.1% | -545.4 | -330.4 | -873.0 | 65.1% | -37.5% |
Education & Social Services | -14.1 | -20.9 | 1.4 | -32.7% | -1,000.0% | 16.8 | -692.9 | -314.7 | -102.4% | -105.3% |
Receipt | ||||||||||
Other | 4.5 | 6.2 | 10.5 | -28.2% | -57.5% | 126.4 | 210.9 | 230.6 | -40.1% | -45.2% |
Customs Duties | 5.7 | 6.6 | 6.4 | -12.3% | -10.9% | 77.4 | 98.0 | 85.6 | -21.0% | -9.6% |
Taxes - Excise | 7.0 | 7.1 | 6.4 | -1.9% | 9.0% | 76.8 | 88.2 | 80.1 | -12.9% | -4.2% |
Corporation Income Taxes | 93.9 | 87.8 | 38.7 | 7.0% | 142.8% | 464.1 | 431.6 | 401.6 | 7.5% | 15.6% |
Social Security Taxes | 140.0 | 131.7 | 131.6 | 6.3% | 6.3% | 1,579.7 | 1,439.9 | 1,263.8 | 9.7% | 25.0% |
Individual Income Taxes | 178.2 | 215.5 | 183.1 | -17.3% | -2.7% | 2,196.9 | 2,601.3 | 2,232.8 | -15.5% | -1.6% |
Total | ||||||||||
Outlay | -558.7 | -539.9 | -525.4 | 3.5% | 6.3% | -6,305.0 | -6,289.0 | -6,871.4 | 0.3% | -8.2% |
Receipt | 429.3 | 454.9 | 376.8 | -5.6% | 13.9% | 4,521.3 | 4,870.0 | 4,294.5 | -7.2% | 5.3% |
Total | -129.4 | -85.0 | -148.6 | 52.2% | -13.0% | -1,783.7 | -1,419.1 | -2,577.0 | 25.7% | -30.8% |
Data as of: Dec 2023. % Changes are capped at 1,000%. | ||||||||||
Zooming out and looking over the history of the budget back to 1980 shows a complete picture. Both spending and revenue saw a big jump right at the beginning of Covid. Spending saw a retrenchment but has since reversed and started growing again. On the other side, revenue was flat for months, but has been dropping in recent months. This means that the recent tax windfalls that helped buffer the increase in spending has now waned as evidence by the $2.1T TTM deficit.
Figure 9: Trailing 12 Months (TTM)
The next two charts zoom in on the recent periods to show the change when compared to pre-Covid.
As shown below, total Receipts have surged higher in the wake of the pandemic but have since come down.
Figure 10: Annual Federal Receipts
On the other side, expenditures surged earlier in the pandemic, dropped down some, but have now exceeded $6.6T.
Figure 11: Annual Federal Expenses
The view below shows the deficit as a percentage of GDP. As seen, the deficit spiked in response to Covid, retraced, but is now heading back up rapidly. The relative deficit is still below the 2009 level, but the 10% in 2009 was in the midst of the Great Recession. We are now at 8% and the meat of the current recession lies ahead. As tax revenues continue to fall, or at best flat-line, expenses are likely to surge. This will happen as GDP falls, expenses increase, and revenue falls. This is the perfect storm that will blast the relative deficit to new all-time highs.
Note: GDP Axis is set to log scale
Figure 12: TTM vs GDP
Finally, to compare the calendar year with previous calendar years (not fiscal budget years), the plot below shows the YTD numbers historically. The current year expenses trail only the Covid stimulus years in 2020 and 2021.
Figure 13: Year to Date
Two trillion dollars! This is not an emergency, a major recession, or some other extraordinary event. The TTM deficit in normal times is over $2T! There is not much else to say. This is unsustainable and completely out of control. The Fed has no options but monetize the debt. They are on pause as long as they can be.
Prepare in advance for the pivot. The math is pretty simple and it should be clear to anyone that the pivot is coming. They have no other viable option.
Data Source: Monthly Treasury Statement
Data Updated: Monthly on eighth business day
Last Updated: Period ending Dec 2023
US Debt interactive charts and graphs can always be found on the Exploring Finance dashboard: https://exploringfinance.shinyapps.io/USDebt/