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Failed Projections Or Just Another Government Lie? You Judge!

Tyler Durden's picture





 

Submitted by Michael Lombardi via Acting-Man blog,

Not so long ago, the Congressional Budget Office (CBO) said it expected the U.S. government to register a budget deficit in the current fiscal year of $642 billion.

But hold on a minute…

The budget deficit so far (as of May 31, 2013) has already hit $626.3 billion, and we still have four more months to go in the government’s current fiscal year!

Since the beginning of the U.S. government’s current fiscal year 2013, which began in October of last year, the government has posted a budget deficit in six out of the past eight months.

The Department of the Treasury just reported the U.S. government registered a budget deficit of $139 billion for the month of May. The federal government took in $197 billion and paid out $336 billion for the month. (Source: Department of the Treasury Financial Management Service, June 12, 2013.)

Comparing it to last year, May 2013’s budget deficit was 11% higher than that of May 2012.

The government has been raking in a budget deficit of over one trillion dollars in each of the last four years; and with four months still left in this fiscal year, it wouldn’t surprise me to see us register a fifth consecutive year of trillion-dollar-plus deficits, despite being repeatedly told by politicians that our budget deficit this year would come in under $800 billion.

This is troubling news; the more budget deficits the U.S. government registers, the more the national debt will increase, and the more the government will need to borrow to pay for expenses. It’s that simple.

Currently, our national debt stands at $16.9 trillion. (Source: www.investmentcontrarians.com, last accessed June 14, 2013.)

The ratio of the U.S. national debt to the gross domestic product (GDP) of the U.S. economy is close to 110% percent. This means that we owe more than what we produce in one year.

The chart below shows a gruesome picture of our national debt compared to U.S. GDP. Notice the rate of change since 2008—it is skyrocketing.

Lombardi-Graph-2

Chart copyright Lombardi Publishing Corporation, 2013; Data source: Federal Reserve Bank of St. Louis, June 14, 2013 – click to enlarge.

The U.S. has been the family that spends more than it earns for many years now. In the short term, spending more than one takes in can work (especially if the Fed just prints new money and gives it to the government to pay its bills). But in the long term, if fundamental changes are not made to the government’s spending habits, financial chaos just starts all over again.

Posting a budget deficit year after year is not sustainable. The debt-infested eurozone nations did very much the same; they borrowed to spend. Look where they are now.

 

Michael’s Personal Notes:

Finally, some good economic news is coming to the U.S. economy …

The U.S. Census Bureau has reported that retail and food services sales for the month of May, adjusted for seasonal effects, increased 0.6% from April and 4.3% from the same period a year ago.(Source: U.S. Census Bureau, June 13, 2013.) This is the first report I’ve seen in a long time that shows increasing consumer spending in the U.S. economy.

And the Thomson Reuters/University of Michigan Consumer Confidence Index for May showed consumer spending increasing as well. The index registered at 84.5 in May, improving from 76.4 in April. (Source: Bloomberg, May 31, 2013.) This was the highest level the index has been at since July of 2007.

While this is all good news, my concerns about the U.S. economy remain…

Since the financial crisis in the U.S. economy, the Federal Reserve has been increasing the size of its balance sheet (printing trillions of dollars in new money) and the U.S. government has been spending vigorously, all for the sake of spurring economic growth. Consumer spending in the U.S. economy makes up 70% of our gross domestic product (GDP); hence, it’s vitally important that consumer spending rises if we are to have a sustainable economic recovery.

As it stands, the Federal Reserve is still creating $85.0 billion a month in new money to purchase government bonds and mortgage-backed securities. This may be the biggest reason why economic numbers like May’s retail sales are looking better.

But the unemployment rate in the U.S. economy is still staggeringly high. According to the most recent jobs market report, there are almost 12 million people who are jobless in the U.S. economy; more than 15% of the U.S. population is on some form of food stamps, and that number has been increasing at a serious pace.

Last but not least, there are still millions of Americans in the U.S. economy who are living in a house with negative equity - their house is worth less than the loan on their home.

The minor “pop” we are seeing for some U.S. economic numbers could turn in the wrong direction very quickly. Troubles from the global economy will eventually move into the U.S. economy. Retail sales and consumer confidence increasing is certainly a step in the right direction, but I wouldn’t break out the champagne yet.
 

Michael Lombardi is the founder and head of Lombardi Publishing Corporation (News, Analysis, and Information Services) in New York.  He  provides his market insights in articles in the 'Profit Confidential' service.

 


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Mon, 06/17/2013 - 11:49 | Link to Comment Ahmeexnal
Ahmeexnal's picture

FORWARD!
Ogolfer is always right!

Mon, 06/17/2013 - 11:49 | Link to Comment localsavage
localsavage's picture

Those votes are more expensive than we thought.....

Mon, 06/17/2013 - 12:06 | Link to Comment derek_vineyard
derek_vineyard's picture

Stock Market Standings

 

Fed     85 bil

ZH        0

Crash    no chance

Mon, 06/17/2013 - 12:12 | Link to Comment otto skorzeny
otto skorzeny's picture

Wow- eternal wealth-so this can continue 4EVA- they should have thought of this years ago.

Mon, 06/17/2013 - 12:43 | Link to Comment SheepDog-One
SheepDog-One's picture

Yea I don't know why humans couldn't have figured out this ultra-EZ way to vast riches and okey dokey economies LONG ago! Just have to IMAGINE it, and it's TRUE!

Mon, 06/17/2013 - 12:44 | Link to Comment knukles
knukles's picture

I love it when a sequester come together.

Mon, 06/17/2013 - 13:11 | Link to Comment A Nanny Moose
A Nanny Moose's picture

A broken clock is at least right twice per day. Has the CBO been correct? Ever?

Thu, 07/11/2013 - 02:14 | Link to Comment Notarocketscientist
Notarocketscientist's picture

Hey smart ass -  unless Bernanke has invented a perpetual motion machine then the score will eventually reverse itself.

And you know what - when you go begging like a dog for some PM the guy at the counter is gonna laugh... he's gonna laugh so goddam hard hahahah HAAAAHAAA HAAA HAAAA HAAAA

Then when I see you plunked on the side of the highway with your wife and kids warming a can of dog food over a fire of plastic bags, with a slight fall drizzle falling on you - I'm gonna holler out 'hey smart ass 85-0 how's that dog food?' 

And you will be able to put a face to the name.

Mon, 06/17/2013 - 11:48 | Link to Comment Debt Slave
Debt Slave's picture

The beauty of the Fed means you can have your cake and eat it too. For a while.

Mon, 06/17/2013 - 12:21 | Link to Comment augustusgloop
augustusgloop's picture

you can have your cake and eat it too if you keep printing cakes. 

Mon, 06/17/2013 - 11:49 | Link to Comment otto skorzeny
otto skorzeny's picture

Ronnie Reagan- bitchez.

Mon, 06/17/2013 - 12:48 | Link to Comment knukles
knukles's picture

The greatest thing about Ronnie Raygun was unlike any of his successors, when you got up in the morning, you knew exactly what he was gonna say that day....
Was a man (OK, so many didn't like him but that is neither here nor there for these purposes) of reasonable principles evidenced by a fairly steady course (All things are relative, to be sure). 
Not like the triangulating and political Topsy Turvy or just plain foundering of some of his follow-ons.  

Mon, 06/17/2013 - 12:59 | Link to Comment otto skorzeny
otto skorzeny's picture

I'm referring to the above debt chart for all of you Prez Jellybean lovers- unless y'all just love debt.

Mon, 06/17/2013 - 13:46 | Link to Comment kralizec
kralizec's picture

More debt = more freedom, the new normal, forward!

To infinity and beyond!

(At least until it all blows up in their faces...)

Thu, 07/11/2013 - 02:06 | Link to Comment Notarocketscientist
Notarocketscientist's picture

Reagan was as CUNT.  Bush 1 &2 were CUNTS.  CLINTON was a CUNT. Obama is a CUNT.

The GOP and DEMS are ALL CUNTS. 

Now if only I could find a CUNT that would fuck like they do, I'd be a very happy fellow.

Mon, 06/17/2013 - 11:56 | Link to Comment NEOSERF
NEOSERF's picture

Japan is the light that shows the way through this darkness....110% debt is a drop in the bucket...we are 10 years off from the final reckoning...pass the Cristal...

Mon, 06/17/2013 - 11:57 | Link to Comment youngman
youngman's picture

In the real world...they would lose their jobs for being that wrong....not in government though....pay raises for everyone next year...and the next year..forever....

Mon, 06/17/2013 - 12:01 | Link to Comment hooligan2009
hooligan2009's picture

things may have improved since the june to sept 2012 months..if they haven't ..there's another 1/4 trillion or so to add to deficits for the year ended 30 September 2013.

TABLE I here

http://www.fms.treas.gov/mts/mts0513.pdf

Mon, 06/17/2013 - 12:01 | Link to Comment pods
pods's picture

Don't you have to have a budget to project a budget deficit?

pods

Mon, 06/17/2013 - 12:14 | Link to Comment NoDebt
NoDebt's picture

Oh, that's so quaint you would think that!

Mon, 06/17/2013 - 12:52 | Link to Comment knukles
knukles's picture

But gotta love the irony of it all.
debating, bitching and screaming by politicians about budget deficits, spending, sequester, accounting by agencies, when there is nothing which has been budgeted what so ever!
So what is everybody talking about?
And on top of it, an unlimited checkbook on the FED!
No budget, no baseline, no variances, no slippage, no ifs ands or buts....
Fucking smoke and mirrors!
Wakie wakie time sheeples!

Oh, the complicity of the MSM, FFS

Mon, 06/17/2013 - 12:03 | Link to Comment Surging Chaos
Surging Chaos's picture

Psshaw... deficits don't matter!

Mon, 06/17/2013 - 12:05 | Link to Comment NoDebt
NoDebt's picture

Glad there's finally an article about this.  The "magically-lower" deficit projections for this FY were, and still are a work of fiction.  We'll still top $1T although I suspect the reported number will be in the high 800s (and even that number finally admitted to only after many revisions, when nobody gives a crap any more.  Same as always.)

Mon, 06/17/2013 - 12:15 | Link to Comment thewhigs
thewhigs's picture

"Failed Projections Or Just Another Government Lie? You Judge!" The more important question is when was the last time the Government actually told us the truth?

Mon, 06/17/2013 - 12:20 | Link to Comment ekm
ekm's picture

P R O P A G A N D A

Mon, 06/17/2013 - 12:24 | Link to Comment Dr. Engali
Dr. Engali's picture

Budgets.....funny.

Mon, 06/17/2013 - 16:07 | Link to Comment A is A
A is A's picture

-Daddy, what's a budget?

-Well, when I was your age......

Mon, 06/17/2013 - 12:28 | Link to Comment MagicMoney
MagicMoney's picture

CBO is really not credible judging by past predictions. It's a farce and should not be taken seriously. At least I don't.

Mon, 06/17/2013 - 12:37 | Link to Comment SheepDog-One
SheepDog-One's picture

ALL IS WELL!! Just as long as they can keep spending exponentially more every quarter!

Mon, 06/17/2013 - 12:38 | Link to Comment SheepDog-One
SheepDog-One's picture

Also all the CBO does is look at what it gets handed by clowngress and weighs it....they're not looking at any reality just what they're told.

Mon, 06/17/2013 - 12:40 | Link to Comment kito
kito's picture

I was so into the gloom when the author hits us with some "good news"...I expected to hear that congress balanced the budget....or that the u.s. was withdrawing nearly all of it overseas bases...but his good news is some ridiculous number about fat assed Americans stuffing their faces at applebees (no offense to fonz) more often.....perhaps its because more restaurants accept snap.....or that Americans have lost all self reliance and can't even boil a fucking egg even though they watch the food channel all day to whet their appetites.....

Mon, 06/17/2013 - 12:54 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

This time last year we were at about $845 billion deficit, so it seems like the budget situation is relatively better, but then again, this time last year we weren't on track to start yet another war in the Middle East.  

Mon, 06/17/2013 - 13:17 | Link to Comment eaglerock
eaglerock's picture

Reading this stuff makes me want to bang my head against a wall.  Until I realize that the poor defenseless wall is more intelligent than the idiots in DC.

Mon, 06/17/2013 - 13:22 | Link to Comment Hal n back
Hal n back's picture

its the cash flow deficit, stupid, The GAAP deficit is around 7 trillion and cannot be played with by borrowing from federal pensions to augment cash and avoid going over whatever debt ceiling is in place.

 

of course, no one pays atten to the GAAP Losses. maybe John Williams Shadow Stats.

 

Govt acctg 101

 

Mon, 06/17/2013 - 13:36 | Link to Comment DOT
DOT's picture

Today's "understanding" of the the law and Constitution leads to the conclusion that the Print to Infinity policy IS lawful under the power of the Government to levy taxes.

I am sure Chief Justice Roberts would concur.

Secret Taxes!

Mon, 06/17/2013 - 13:42 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

There are some one time items coming.  Fannie/Freddie's holdings will yield a dividend to Treasury this FY of . . . I think it was $65B or thereabouts.

So that is yet to come over the next four months.  The DoD furloughs won't start until July, and that reduces spending some.

But in general, yeah, CBO has this wrong.  The FY deficit will likely be north of 700B and maybe 800B.  That is down from last year's $1T, because of the tax increase in January and the Sequester.

GDP growth is helping almost not at all, because there is so little of it.

Mon, 06/17/2013 - 13:54 | Link to Comment involuntarilybirthed
involuntarilybirthed's picture

You don't get it.  What is important for government employees is scheduling your earned day off with as many holidays as possible,  getting your 3+ hours of paid physical training (even with furloughs), running personal errands on paid time, going to the most fun conferences, getting room upgrades, rental car upgrades and using you paid air travel and keeping your skymiles for personal use.  And most importantly returning and talking about it for 3 days while not doing shit.   Then taking sick leave when you have a case of anal glaucoma (can't see my ass coming to work today) or for a short trip.  Of course attending every ceremony when your not playing solitare or planning your vacation at your desk with the door close and  taking your 1 hr 15 lunch time when your given 45 minutes then checking your TSP and planning how you can swing some overtime just because you want the extra money.   Then leaving 15 minutes early to make up for coming in 15 minutes late.  The rest of the time they are gossiping, or fucking off.

Mon, 06/17/2013 - 13:53 | Link to Comment Tombstone
Tombstone's picture

As I recently read, government economists are about as useful as screen doors on a submarine.  I couldn't stop laughing.  The CBO's and others predictions are virtually useless, and that includes those from the FED.  In fact, it is the FED which continues to enable the government to deficit spend to the tune of over a $trillion/year.  It is like Benny is saying to the government; go ahead and spend as much as you want on welfare and other government boondoggles, for I will cover you with all the bond buying you need.  Tapering anytime soon?  That is a total joke, as our country has been since The Dictator barged into office.

Mon, 06/17/2013 - 13:58 | Link to Comment involuntarilybirthed
involuntarilybirthed's picture

The only budget that matters is yours.  It is also the only you where you have some control.  This is the one to study, plan and forecast.   

Mon, 06/17/2013 - 14:42 | Link to Comment tarsubil
tarsubil's picture

Chart is BS as GDP is BS. This didn't start with Obama. It started 100 years ago. Obozo is the cherry shaped turd on top of this s*** sunday.

Mon, 06/17/2013 - 15:06 | Link to Comment Nue
Nue's picture

As one person put it. The problem with the Congressional Budget Office is that they get all their numbers from Congress. Garbage in garbage out.

Mon, 06/17/2013 - 15:40 | Link to Comment orangegeek
orangegeek's picture

Here comes the 330p rampapalooza!!!

 

Dow Jones has moved up 50 points in the last 10 minutes.

 

IS THAT YOU FUCKING AROUND WITH THIS KRUGMAN?????!!!!!!

Mon, 06/17/2013 - 15:59 | Link to Comment Don Levit
Don Levit's picture

The author writes "The Fed prints new money and gives it to the government to pay its bills."

Then a bit later, he writes, "The Federal Reserve is increasing the size of its balance sheet."

Puuting these 2 statements together, one can note that the Federal Reserve's balance sheet has indeed increased to over $1.6 trillion of Treasury securities.

These securities , while an asset to the Fed, is a liability to the federal government, as it adds $1.6 trillion to our debt held by the public.

The Fed buying Treasuries has the same financial dynamics as when China buys them  -  they are an asset to the entity, and a liability to our federal government, adding to our total debt.

Don Levit

Mon, 06/17/2013 - 16:19 | Link to Comment Midasking
Midasking's picture

It doesn't make sense for them to lie.. they are our representatives.  If I can't trust Pelosi than who could I trust? http://tinyurl.com/mem7o7x

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