Recession Alert: Government Revenues Suffer Biggest Drop Since The Financial Crisis

Tyler Durden's picture

On the surface, today's monthly budget statement was disappointing: in March the US Treasury brought in total receipts of $216 billion, below the $228 billion last March, versus outlays of a record $392 billion, resulting in a deficit of $176 billion, more than the $167 billion expected, and $68 billion more than the previous year. For the fiscal year through March 31, the total US budget deficit was $527 billion, compared to $459 billion on year ago.

Declining government revenue and long-term costs associated with an aging population are expected to continue pushing up the deficit. Over the past 12 months, the deficit stood at $651.5 billion, compared with $460.6 billion a year ago, an increase of over 40% Y/Y.

On a 12 month run-rate, the US deficit stood at 3.1% of GDP. A year earlier, that figure was a third less, or 2.2%.

More troubling is that in March the US government had its biggest one month outlay ever, spending a record $392.8 billion, $57 billion or 17%  higher than a year ago.

The break down of March spending was as follows:

  • Defense: $58 billion
  • Social Security: 79 billion
  • Medicare: $75 billion
  • Interest on debt: $30 billion
  • Other: $151 billion

However, the most concerning picture emerges when looking at the annual change in the rolling 12 month total. It is here that we find that, like last month, in the LTM period ended March 31, total federal revenues, tracked as government receipts on the Treasury's statement, were $3.264 trillion. This amount was 1.3% lower than the $3.31 trillion reported one year ago, and was the fourth consecutive month of declines. This was also the biggest drop since the summer of 2008.

Why is this important? Because as the chart below shows, every time since at least 1970 when government receipts have turned negative on an annual basis, the US was on the cusp of, or already in, a recession. Indicatively, the last time government receipts turned negative was in July of 2008.

One potential mitigating factor this time is that much of the collapse in receipts is due to a double digit % plunge in corporate income tax, which begs the question what are real corporate earnings? While we keep hearing that EPS are rising, at least for IRS purposes, corporate America is in a recession. As for that far more important indicator of overall US economic health, and biggest contributor to government revenue, individual income taxes? As of February, the YTD number was $695Bn, just fractionally higher than the same period a year ago.

Weak corporate profits have weighed on government finances in recent years amid sluggish global economic growth, depressed energy prices and a strong dollar, among other factors. At the same time, government spending continues to rise as the population grows older and more people qualify for Social Security and Medicare.

The latest, and most troubling budget report in this economic cyle, comes as the Trump administration and Republicans in Congress are weighing proposals to further cut corporate taxes, which would lead to even steeper declines in government receipts, while boosting spending on infrastructure, which are likely to spark a broader debate about tax and spending policies.

As to whether the 4th consecutive decline in tax receipts is indicative of a recession as it has been in the past, we'll just have to wait. If Trump indeed wants a lower dollar and even lower interest rates, this may be just the catalyst that assures he gets precisely what he wants, killing any hopes of Fed rate hikes for the foreseeable future.

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SheepRevolution's picture

We's head spinning so fast. Just ask el presidente...

Raffie's picture

QUICK, ask Yellen what to do. She will explain that the charts are not the be trusted because only she has accurate economic information and our country has never been better.

I feel so much better. Now to go out and buy a $70k truck, $700k house and barrow $2mil to invest in the markets. What can possibly go wrong?

 

 

*sarcasm implied*

 

max2205's picture

Yeah you need a PhD in order to spin this 

BandGap's picture

If you didn't read The Fourth Turning then stop.

This is what is predicted. The Democrat - Republican paradigm has been broken. Maybe Trump is good/bad but he has completed the mission. People have stopped looking along party lines and party leanings (I am excluding the lemmings). So, Donald Trump is a good thing.

Problem is that his election signals bad things. He's not causing dick to happen, but like being a life long smoker who dies of a cold, he's going to get the blame. I don't see him that way but I marvel at people who think that he would be the one to save jack shit. Jack shit left the building in 2008, we are fucking over the cliff. But God bless Donny, he's taken on trying to fly.

With eyes being opened and the world in the shitter this is the time we look for true leadership. Not Trump's fault but we are heading for rough seas.

peippe's picture

Sam's busted & I'm done financing him.

get a shave you methhead bum.

Alok's picture

praying hard for the US bankrupt, before this psychopath country destroy the world...

cherry picker's picture

Now you know why USA is pushing for war.

They need another Marshall plan in the world and an excuse to wipe out countries they owe money to so they can write it off.

GUS100CORRINA's picture

Does anything discussed in this article surprise me? NO.

America's Financial Accomplishments for the last 8 years under OBAMA.

Most Americans have never seen a Trillion Dollars visually. So let's review the financial accomplishments of America under the current DEMOCRATIC executive leadership that the TRUMP administration has inherited!!!

1.) Student Loan Debt - 1.3 Trillion

2.) America's debt - UP over 100% in 8 years,

3.) America's unfunded liabilities - 150 Trillion plus and climbing rapidly

4.) Corporate Debt - Up over 100% in 8 years.

5.) Bank Derivative Exposure - Up over 300% in 8 years.

6.) Amercian Consumer Debt Broke New Records

7.) America's foreign policy - America now pays ransom to terrorist states like Iran (1,700,000,000)

8.) State and Municiple Pension Shortfall - 6 Trillion plus

9.) Fed Balance Sheet - At 4.5 Trillion - Up Over 400% in 8 years

10.) US Government Cannot Account for 6.5 Trillion in its books.

LetThemEatRand's picture

Even though Trump has taken credit for every bit of good financial news since he was elected, I don't blame him for the numbers outlined in this article.  It was baked in the cake before he even announced his candidacy.

What I do blame Trump for is seemingly back peddling or outright pulling a 180 on virtually everything he said he was going to do to fix it.

HRH Feant's picture
HRH Feant (not verified) Apr 12, 2017 7:48 PM

Who is John Galt?

Me. I went Galt years ago.

Seasmoke's picture

Why would anyone want USD ????? 

Dr.Carl's picture

Lower price adds popularity 

peippe's picture

I bought Moon Pie & beer & Powerball tickets with it today...

plus I gave $6 to a bum, he wanted it too. 

So that makes two of us, me & my bum friend. : )

lester1's picture

If inflation was claculated correctly, we never got out of the 2008 recession!!

post turtle saver's picture

So here's the percentile breakdown of those numbers...

 

  • Defense: $58 billion = 14.7%
  • Social Security: 79 billion = 20.1%
  • Medicare: $75 billion = 19.1%
  • Interest on debt: $30 billion = 7.6%
  • Other: $151 billion = 38.4%

(adds up to 99.9% due to rounding but you get the idea)

first of all, wtf is "Other"... it's not the social security or medicare third rail so what's in there that's so special it can't be touched... 

second, 7 to 8% going to interest on debt seems low until you realize how low interest rates are... if rates go up, pop goes the weasel in that category, which is why Trump is all for low interest rates... I mean, what sitting President wouldn't be facing this situation...

last, 14.7% for defense may seem like a lot but we've already had this discussion re: is this reasonable spend or not... I hate to say it but, historically, it actually is...

so, we have 39.2% of entitlements and 38.4% of "Other" that's slushing around to who knows where from one day to the next... looks to me like "Other" has a big fat target on its back if you're looking for low hanging fruit to cut... then again, this is ZH where super complex problems get overly simplified so who knows...

adr's picture

Maybe just about everyone who pays taxes is waiting till the last minute like me, working overtime to find every deduction I can to starve the beast. 

Sadly I can't get every cent back 

AIN'T NO DIMES FO DINDUS!!! 

Nobody asks where I want the tens of thousands taken from me to go. Because I don't get to choose means they don't deserve it. 

I'm pissed enough that I have to pay $1 more a day for my kids lunch to pay for the ones that get lunches for free. Seeing most of my tax money pay for Ghetto trash and Tomahawk missiles boils my blood. 

post turtle saver's picture

I hate to break it to you, but you're starving one beast to feed another...

don't know if anyone's noticed lately, but we're right smack dab in the middle of a housing bubble again... what does that mean... it means people are writing off way more than they did previously in the form of mortgage interest and property taxes (which, btw, have been _going through the roof_ just about anywhere you look)...

so, the feds don't get money because that money already went to state / county / municipal which in turn was written off... damned if you do, damned if you don't...

Never One Roach's picture

I'm beginning to think it's better for the average American [like me] to quit and join the FSA and get free housing, free food, free health care, free cell phones, free purple escalade, and a free extra wide Walmart scooter.

Jerdog's picture

Are businesses deferring income in expectation of tax reform/reduction?

philipat's picture

No. Real EPS on a GAAP basis are down for three years straight (And without buybacks would be down even more) for one simple reason: nobody has any money!! Don't look at the garbage Wall Street feeds you with, GAAP (As Reported) data is all that matters.

scoutshonor's picture

I've also been Galty for years.  If things ever improve I doubt that I will ever return to the way I lived prior to my conversion.  I used to talk with my grand parents about what it was like raising 5 children during the depression--they never regained their trust in government.  

I doubt that I will either--I might even start collecting string;-^

nachochan's picture

What better way for the fed to offload its balance sheet than have another war.  BTFD

billwilson2's picture

Trump = Big Spender 

Trump = Bankruptcy

Same old song.

Herdee's picture

It all adds up to below trend growth, the American economy can never get back to the good old days:

http://video.cnbc.com/gallery/?video=3000609426

Let it Go's picture

It may be time to dust off the term "the new normal" a reference created after the 2008 financial crisis to describe an economy mired in slow growth. The term has not been used much lately but has become the reality we face. Something that should make people concerned is that grinding stagflation is on the horizon.

A strong case can be made that the economy is about to stall under strong headwinds as the burden of past debts and future promises made to those retiring and unable to find good jobs begins to weigh heavily upon society. The article below delves into the idea of slow growth coupled with stagflation.

http://brucewilds.blogspot.com/2017/04/expect-slow-growth-coupled-with.html

Raging Debate's picture

Let it Go - Stagflation "on the horizen?!?!" Where you been since 2005? 

media_man's picture

To quote Mark Steyn, we'd need to find $20 Trillion lying around to have nothing in our pockets. Brokest nation in history.

WillyGroper's picture

perhaps they can locate the $10T missing @ DOD to take some of that pressure off.

they're making enuf money with their drug, kiddie & organ running.

Raging Debate's picture

Wait, I have a solution. Print more, increase illegal immigration, add a new O'Bummer care tax, more bombs away and more telling white people it's all there fault and are terrorists. Sound good? YES! Got your bunker yet? No? you must be stupid and suck. So you deserve to die. Have a nice day :^)

GraveDancer's picture

The Road to World War III: Can the Dark forces of anti-Freedom trump Humanity? Kindle Edition

 

httaps://www.amazon.com/dp/B01MT31AXZ

Sick Monkey's picture

Notice the two spikes in revenue possibly coinciding with two periods of easing. Difficult to follow the money after the transfer of one bank to another so it's most likely a confidence boost encouraging normal spending. In other words money tucked away somehow in pensions, RE or any other dimes and nickels earned via blood sweat and tears. Is it tied to QE. Impossible to tell even with an audit. You can't mark ones and zeros with a serial number. The monetary tension headlines between nations is for public consumption. In reality central banks now have to closely control and sometimes coordinate transfers to avoid accidentally killing one of their own. If Americans knew they were directly paying to prop up socialist regimes creating no go zones within the city their great grandfather helped build and defend that revenue chart would drop to ground zero in one quarter. Free trade and money laundering a la digital. Elite have never had it better. China was a little late in the game but they are very enterprising and quick to learn. The chess board is complete. 

Fed-up with being Sick and Tired's picture

It is interesting to me:  all this talk about FISCAL PRUDENCE!    You know, we need to balance this and that, find that 10 to 20 billion missing in Iraq and somehow what is missing is that 95% of us here are in debt, borrowed to own cars, RV's, Motorcycles, Homes, and clothing.  MOST FOLKS cannot put together a six-month stack of Dollars to cover a rough patch.  HOW IN THE FUCK, then CAN WE FUCKING EXPECT our leadership to CUT BACK AND LIVE WITHIN ITS MEANS.

AIN'T gonna fucking happen, folks.  If and UNTIL we can ALL LIVE within our means, which MEANS that we COLLAPSE, then nothing changes.

Fed-up with being Sick and Tired's picture

Clearly, we are BUILT upon borrowing.  I am personally debt-free, live in an RV, full time, on the road and our cost of living has plunged 75%.