BNY ConvergEx: "For Every $1 Of Proceeds From Taxpayers, The Federal Government Issues More Than $1 In New Debt"

Tyler Durden's picture

In his Friday commentary piece "Tax and Spend. And Spend", Nicholas Colas of BNY ConvergEx read our mind and posted this concise summary on the comparison between 2009 and 2010 tax withholdings, and the unique dynamics thereof. Whereas we will present a detailed analysis of this comparison shortly as there have been numerous interesting themes to discuss, we present the following piece from Colas as a great backdrop to our soon to be posted results. And for all those claiming the tax picture in the US is improving (we are looking at you Daniel Gross), here is the simple reality of the situation: "Simply put, for every $1 of proceeds from taxpayers, the Federal government issues more than $1 in new debt." Must read for all "improvement-ists", especially since Colas references the holy grail of all financial reporting: our all time favorite necessary and sufficient DTS.

Tax and Spend. And Spend.

Summary: You may not look at them very often, but that myriad of deductions on your paystub (who knows what OASDI even is?) are actually a powerful – and overlooked – tool to understand the state of the U.S. economy. The U.S. Treasury publishes a daily report that includes how much it is receiving in “withheld income and employment taxes”, making this a virtually real-time look at labor markets and trends in wages. The good news: individual withholding/tax  receipts are virtually flat to last year for the first half of 2010, up 0.2% to $845.3 billion. Even though the Bureau of Labor Statistics estimates there are 900,000 fewer workers now than a year ago, tax receipts are flat, which means wages are up close to 1%. The bad news: the U.S. has issued $892 billion of incremental Federal debt over the same period. The country has some modest offsets – corporate taxes are recovering, but year-to-date revenues from this source are only $149 billion. Simply put, for every $1 of proceeds from taxpayers, the Federal government issues more than $1 in new debt.

My undergraduate degree was Near Eastern Archeology, so I enjoy finding little pieces of the past in ordinary modern life. Yesterday was payday at ConvergEx, and in perusing the twice-monthly paystub I found such a historical artifact. It is probably on your paycheck as well, labeled “OASDI.” It stands for Old Age, Survivors, and Disability Insurance. A neatly non-politically correct phrase there, and not surprisingly so, given that the term goes all the way back to the Great Depression. Now it would probably be called something else, but its archaic, 1930s name has stuck and everyone with a paycheck has a hidden reminder of a time when the country’s older citizens often lived in the most meager of conditions. You know OASDI by its other name – Social Security.

The U.S. Treasury collects not only Social Security, but Medicare and Federal Tax Withholding on a daily basis. It also publishes a report containing not only these receipts, but also corporate tax payments, proceeds from bond issuance, and all the major categories of the Federal budget. You can see it here:

We find the Treasury’s Daily Statement especially illuminating because it publishes exactly how much money it is receiving from the taxpayers of America each and every day. Since the vast majority of the “Withheld Income and Employment Tax” line comes from payrolls, it is in effect a very reliable barometer of current employment and wage trends. Far better, to my thinking, than the endlessly revised monthly Employment Situation report or the seasonally adjusted weekly Initial and Continuing Claims for Unemployment.

For the first six months of 2010, “Withheld Income and Employment Taxes” – and by extension the U.S. labor market - is essentially flat with last year’s first half, up 0.2%. That fits with some of the less robust data we alluded to above – the U.S. workforce is basically stagnant year-on-year at 139 million employed Americans. Strictly by the BLS data, there are actually 919,000 fewer employed people now than last year, so the up 0.2% actually shows that wages are up about 1.0%. And if you want to get really wonk-ish with the numbers, the first half of last year had some modestly higher withholding rates, equivalent to about 1.0% more wage growth in 2010. But no matter how finely you cut the data, the upshot is pretty clear – the labor market is about the same place it was in 2009. Disappointing, given the rafts of monetary and fiscal stimulus injected into the economy, but that’s where we are.

As for corporate tax receipts, these are on a better upswing for the year-to-date, up 33% for the first six months versus the same period last year. That speaks to better corporate profitability thanks to stringent cost cutting/layoffs in 2009. The fly in the ointment, as it where, is that what you learned in economics class is pretty much true: companies do not pay taxes. At least not very much of them. For the first half of 2010 Treasury booked $148 billion of corporate taxes. Individual taxpayers – people, not companies, paid almost six times this amount - $845 billion – in the first half of the year.

This leads us to a second reason why the Daily Treasury Statement is a useful document – it shows the degree to which the Federal budget squares up in terms of inflows and outflows. Think of it as Uncle Sam’s checking account. I think we all know the picture isn’t pretty here, but a few points to put some context around the problem.

  • We already know several important numbers – “people” tax receipts YTD of $845 billion and “corporate” tax receipts of $148 billion. Tax refunds for the calendar year thus far have been $371 billion, mostly to individuals. So the country’s tax receipts, round numbers, are $622 billion year to date. There are some miscellaneous other income lines – excise taxes primarily, that add about $35 billion. Total, total: $657 billion in taxes/withholding.
  • In the same period of time – the first 180 days of 2010 – the U.S. Treasury has issued some $892 billion in incremental debt. Almost all of it was issued to the public, rather than the customary practice of selling a piece to the Social Security system. That was not by choice – the reduced amount of withholding we outlined above means that Social Security has not had any material inflows of new money to invest in 2010. So all that newly issued debt – much of which went out as short term Treasury Bills – will need to be “rolled” as it matures. That means it has to find new buyers every 3, 6, 9 or 12 months.

We think this comparison neatly sums up the bind the U.S. still finds itself trying to disentangle. Through the first half of 2010 new debt is over 33% larger than tax and withholding income. Yes, there are some other ancillary sources of reported income in our Daily Treasury statement – State reimbursements for unemployment insurance, Federal Reserve Bank earnings and the like. But even when you lump every piece in, the ratio of taxes/withholding to new debt is still not one-to-one. For every dollar of withholding, the government issues more than one new dollar of debt to fund its total expenditures.

Economics is the study of how societies allocate inherently scarce resources. Even this brief outline of taxation and government spending makes me think that the scarcest resource of all might just be common sense.

from Nicolas Colas of BNY ConvergEx

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New_Meat's picture

with a minus sign in front. - Ned

nmewn's picture


Debt will always humble those who bet against it in this game of chicken.






Rainman's picture

Excellent. This income news means goobermint is the biggest, most successful subprime borrower of all least for now.

And the best news of all is that we taxpayers will never be able to pay it all off. 

Rusty_Shackleford's picture

Yeah, but at least we're borrowing all this money to improve important long term growth needs, like infrastructure,.... Pakistan's infrastructure that is:

Papasmurf's picture

Each dollar of new debt the federal government creates,  is a dollar theft from savers in the form of stealth taxation.

thesapein's picture

and stealth ownership of those who borrowed after their savings and income were destroyed by inflation.

hungrydweller's picture

"The fly in the ointment, as it where, is that what you learned in economics class is pretty much true: companies do not pay taxes. At least not very much of them."

Only partly correct.  Corporations pay NO taxes.  Only people pay ALL taxes.  Corporate "taxes" are just expenses that get built into the price of goods and services which are purchased, in the end, by people.  Kudos to those corporations which are good at keeping their "tax" burden down.  This means they can keep their prices down and we pay less for what we want and need.

RockyRacoon's picture

Say, what?  Then why tax them at all?  Any corporation in the U. S. should be forgiven of all taxation.   That would really spur the economy?  How's that working for GE which paid NO taxes at all.  Hell, let's just remove the tax burden from the working stiff as well.  Just let the gov't print all it needs.  Why tax at all? Taken to the extreme, some seemingly great ideas are seen for what they really are.

poopdeville's picture

He must have skipped "Elasticities of supply and demand week" in Introductory Economics.

thesapein's picture

How exactly does that work against him? He didn't say anything about it being directly proportional or invariant. 

poopdeville's picture

The "he" to which I was referring was hungrydweller, who appears to be ignorant of the concept of a tax incidence and its relation to price elasticities of supply and demand.  He claimed an invariant relationship:  

"Corporations pay NO taxes.  Only people pay ALL taxes.  Corporate "taxes" are just expenses that get built into the price of goods and services which are purchased, in the end, by people." 

thesapein's picture

Yes, we had the same "he," and I still think he was merely trying to point out that we're talking about people, getting all philosophical on us. I don't think he was trying to say that a 10% tax means prices are 10% higher. I hope not.

poopdeville's picture

Unfortunately, I'm pretty sure that's what he meant.

"Kudos to those corporations which are good at keeping their "tax" burden down. This means they can keep their prices down and we pay less for what we want and need."

RockyRacoon's picture

I was simply pointing out the logical fallacy.  I don't agree with either extreme of the argument.  Didn't mean to start a firestorm.

A Nanny Moose's picture

ok, so McDonnels get a 3% tax increase. You suppose they just absorb that? Sure, supply/demand adjusts. Perhaps thay tax sends one of their competitors out of business. Yet somehow, the tax still remains, and gets passed along to the end consumer, just as Social Security tax they pay on your behalf, is money otherwise in your paycheck.

thesapein's picture

If you're right, then you are wrong.

Someone says that maybe taxes should be lower so you think this is silly because why tax at all then. Turn that around, someone says maybe taxes should be higher so hypothetical you would then say why not tax 100%. See? Whatever you're trying to say can't be right.

Trundle's picture

Corporations should pay no taxes and should offshore jobs with impunity.  As American workers' employment eclipses in a death spiral, government should hand out food stamps and Kraft parmesan cheese.  Pasta is extra.

thesapein's picture

Is there such a thing as meta-economics? I get what you're saying, I think, but I would also like to point out that the receiving end is also people. A government is just people, too.

I think of taxes as not taking away from or adding anything real. What is real is how taxes redirect capital.

Somebody like Rocky says he thinks a road in front of his house is important enough for the state's hired thugs to force you to pay for the road. You might think we need more mass transit instead, but the other neighbors tell you to shut up and pay you immoral bastard.

RockyRacoon's picture

I think we agree a lot more than you think.  Confiscatory taxes, regardless of what it is spent on, is not my idea of liberty.  As they say, a man should own his own labor.  And what he does with the salary is his own business.  Promoting the general welfare is not legally justifiable for the gov't writing a check to a specific person.

DR's picture

Corporate savings from lower taxes can be siphoned into CEO paychecks and stock dividends. It doesn't necessary flow into lower consumer prices.

thesapein's picture

Right, but taxes are a "siphon" enforced by just another group that could be just as corrupt, however, has the full backing of the police force. Opting out is less of an option. Private companies can't (or shouldn't) be able to force people to pay them. If I think a company is bad, I buy from someone else, letting them take a profit that I feel is fair.

Why do people trust elected officials more than non-elected business owners? I suspect it has to do with the idea that voting gives us more representation and power than does trading with each other. No one votes with their money any more?

LeBalance's picture

In a receivership, Zero of the collected booty goes to the country, it All goes to the creditors.  Every credit card transaction and every check goes to the first payee in line, the creditors, who then *loan* the same amount back to your strawman (adding that tally to your second true book) in the form of a payment to the payee.

The amount Owed on the second book never goes down. Ever. Not for you and certainly not for the country. That is how the game is designed.

Just my $0.02.

Rusty Shorts's picture

This should work out REAL good.

Rogerwilco's picture

Will you guys please tone it down? Mr. Obama is trying to enjoy his taxpayer-funded vacation in scenic Maine.

NOTW777's picture

not to mention the family dog flown in by jet, the king's 16 vehicle motorcade and the local cult followers bringing sacrifices to the god

Gully Foyle's picture


WTF is it with politicians and Maine? Never Pa for a vacation or Idaho.


NOTW777's picture

dont know and dont understand.  one of the few states Ive not been to.

my guess is the relative privacy.

funny, syfy channel has a new show called haven about weirdness in maine.

i have no problem with any president taking a vacation.  i do have a problem with a pres who cant show leadership.  it just seems obama loves to rub it in. with all the americans presently suffering one would think he could use some discretion.


RockyRacoon's picture

Right!  He should either hole up in the White House, or be at a small, un-airconditioned contractor shed on the oiliest Gulf bayou we can find.  He's just too pampered.  I say we remove all the toilets from the White House and install outhouses at least 50 yards from the back door(s).

Red Neck Repugnicant's picture

Let's talk about vacation days for a moment, shall we? 

The all time record for presidential vacation days was - you guessed it - George W Bush. Our favorite little cowboy spent 487 days at Camp David and 490 days at his ranch in Crawford chopping brush.

Over the course of 8 miserable years, that works out to 122 days/year, approximately 4 months of every year, or 33% of his presidency.

While Bush spent 1/3 of his presidency chopping wood and chasing fire flies, the United States racked up some notable moments in history:

1.  The worst terrorist attack EVER.

2.  Retaliation for the terrorist attacks by invading the wrong country.

3.  Marketing of that war to the American people based on bad information, lies, deception and half-truths. 

4.  Announced "Mission Accomplished" three weeks after the war started, yet the war continues 7 years later. 

5.  Doubled the national debt from ~$6 trillion to ~$12 trillion.

6.  The worst recession since the Great Depression.  Arguably, some pockets of the economy leapfrogged the recession and landed squarely in a depression. 

7.  A crash of the stock market, a collapse of household wealth, and a total evisceration of our banking system.  

8.  Grand theft and larceny of the American taxpayer to support failed institutions that are politically connected.

9.  The final, undeniable transformation of the United States into a plutocracy.


Reese Bobby's picture

Bush = Clinton = Bush = Obama... Wake Up!

Red Neck Repugnicant's picture

I am awake.  Unfortunately, many around here are not. 

MarketTruth's picture

Clinton... Bush... Obama.... nice puppet front-men. Perhaps you may want to look higher at who truly pulls the strings.


thesapein's picture

Clinton, as much as I hated him, was too smart and well informed under Quigley to be a puppet.

Bush was as stupid as a puppet, but had a powerful heritage at least going back to his grandfather.

Obama... What do we know? Where did he even come from? He's either the pop rockstar who thinks he is the shit but is about to crash (maybe in a plane) but doesn't know why, or he's in on it and is a smooth actor. I dunno.

Speaking of that movie, did you see that Alex Jones's youtube site got "hacked" and that movie was one of many deleted? Apparently, it was getting way too popular. Or maybe Alex did it to himself? Can't think of exactly why though he would do that.

Monkey Craig's picture

totally agree about Obama. it is scary that the leader of our country could come out of nowhere.


on another thread, somebody wrote 'if even 20% of what Alex Jones says is true, we are screwed.'

Red Neck Repugnicant's picture


Every time I hear a bell I'm conditioned to remember that the outward appearance of the Republican party is not indicative of its inner substance.  They're nothing but a bunch of charlatans, preaching ideologies that no longer apply to their party. 


Ragnar D's picture

Yes, so in response you endlessly spam this website (and I assume anyone who'll put up with you in real life) cheerleading for the Party of Government.

IE, every fault of every RINO put on steroids and mixed with control freak, central planner ideology.


That'll really stick it to those mean ol' Republicans!  Let's give the politicians control over even more of our lives, buy votes from Entitled dependents with handouts stolen from those working for a living, and turn the whole country into Detroit.


We've replaced "compassionate (non)conservativism" with disingenuously compassionate authoritarianism.

Reese Bobby's picture

I am usually a man of conviction.  But I am not sure who is a bigger retard ("The Hangover" pronunciation): Pavlov or you?

Heavy's picture

Corporate taxes, what corporate taxes?  Nothing to see here people, move along!

mbasham's picture

Six month data? A nice summary of what was.... four months ago. If you cite the daily data, why not use it?

The personal income tax analysis done here is superficial... a high school effort. Personal income taxes are also paid on dividends, interest and capital gains, so the flaws in the conclusions presented make them almost worthless. I find the Rockefeller Institute to be a very reliable source of info on state income tax collections, and they provide GOOD analysis of the relationship of said taxes to employment for free.

Frankly, I trust the RI data more than I trust the BLS propaganda.

Reese Bobby's picture

Good points Sparky.  Obviously our Government's finances are in fine order.  Thanks for your value added insight...

mbasham's picture

Rogerwilco. Don't be a DB! Sounds like you were a big fan of Bush, who spent more than half his presidency on vacation, and the rest looking for his brain.

RockyRacoon's picture

...and a fruitless search at that.

GlassHammer's picture

"the scarcest resource of all might just be common sense"

No the scarcest resource of all is integrity which is strictly opposed to the one flaw all our leaders share, self deception. 


G-R-U-N-T's picture

Interesting that many in the current administration have graduated from ivy league universities, the most prestigious schools in our land, and yet they are as dumb as a fence post when it comes to common sense.

The lack of common sense is part of the residue of having no integrity. There is no intelligence, no leadership without it, that's why the insanity continues.

Insanity is the inability to recognize the truth, and there is little or no truth in government these days. This is part of the gut feeling that most of us Americans are feeling, that something is deeply wrong, and part of that feeling is knowing we are being lied too.

Gully Foyle's picture

Best read this ( I quoted part enjoy)

America's Ruling Class -- And the Perils of Revolution

Although after the election of 2008 most Republican office holders argued against the Troubled Asset Relief Program, against the subsequent bailouts of the auto industry, against the several "stimulus" bills and further summary expansions of government power to benefit clients of government at the expense of ordinary citizens, the American people had every reason to believe that many Republican politicians were doing so simply by the logic of partisan opposition. After all, Republicans had been happy enough to approve of similar things under Republican administrations. Differences between Bushes, Clintons, and Obamas are of degree, not kind. Moreover, 2009-10 establishment Republicans sought only to modify the government's agenda while showing eagerness to join the Democrats in new grand schemes, if only they were allowed to. Sen. Orrin Hatch continued dreaming of being Ted Kennedy, while Lindsey Graham set aside what is true or false about "global warming" for the sake of getting on the right side of history. No prominent Republican challenged the ruling class's continued claim of superior insight, nor its denigration of the American people as irritable children who must learn their place. The Republican Party did not disparage the ruling class, because most of its officials are or would like to be part of it.

Never has there been so little diversity within America's upper crust. Always, in America as elsewhere, some people have been wealthier and more powerful than others. But until our own time America's upper crust was a mixture of people who had gained prominence in a variety of ways, who drew their money and status from different sources and were not predictably of one mind on any given matter. The Boston Brahmins, the New York financiers, the land barons of California, Texas, and Florida, the industrialists of Pittsburgh, the Southern aristocracy, and the hardscrabble politicians who made it big in Chicago or Memphis had little contact with one another. Few had much contact with government, and "bureaucrat" was a dirty word for all. So was "social engineering." Nor had the schools and universities that formed yesterday's upper crust imposed a single orthodoxy about the origins of man, about American history, and about how America should be governed. All that has changed.

Today's ruling class, from Boston to San Diego, was formed by an educational system that exposed them to the same ideas and gave them remarkably uniform guidance, as well as tastes and habits. These amount to a social canon of judgments about good and evil, complete with secular sacred history, sins (against minorities and the environment), and saints. Using the right words and avoiding the wrong ones when referring to such matters -- speaking the "in" language -- serves as a badge of identity. Regardless of what business or profession they are in, their road up included government channels and government money because, as government has grown, its boundary with the rest of American life has become indistinct. Many began their careers in government and leveraged their way into the private sector. Some, e.g., Secretary of the Treasury Timothy Geithner, never held a non-government job. Hence whether formally in government, out of it, or halfway, America's ruling class speaks the language and has the tastes, habits, and tools of bureaucrats. It rules uneasily over the majority of Americans not oriented to government.

The two classes have less in common culturally, dislike each other more, and embody ways of life more different from one another than did the 19th century's Northerners and Southerners -- nearly all of whom, as Lincoln reminded them, "prayed to the same God." By contrast, while most Americans pray to the God "who created and doth sustain us," our ruling class prays to itself as "saviors of the planet" and improvers of humanity. Our classes' clash is over "whose country" America is, over what way of life will prevail, over who is to defer to whom about what. The gravity of such divisions points us, as it did Lincoln, to Mark's Gospel: "if a house be divided against itself, that house cannot stand."

Reese Bobby's picture

It all went to shit once politicians started buying votes with printed money and unfunded liabilities.  So: we have Congesspeople who I am prety sure can't read; the melting pot stopped melting; taxpayers are slipping itno the minority; iPads are selling well...