The Striking Reason Why The US Just Spent A Record $429 Billion In One Month

Tyler Durden's picture

On Thursday morning the CBO released a surprisingly upbeat assessment of Donald Trump's proposed budget, calculating that it would cut the cumulative US deficit by 30% over the next decade, preventing the US debt from spiraling out of control (even further).

That however. may be an overly optimistic assessment, especially following the release of the latest monthly budget data, which showed that not only did the US deficit surge to $90 billion, far above the $38 billion consensus estimate, and a "NM" compared to the $6.3 billion budget surplus in June of last year, but the US also saw the biggest one month outlay on record, at $429 billion, 33% higher than the $323 billion in outlays one years ago.

What prompted this massive surge in outlays?

The biggest reason for the outlier print is that according to Stone McCarthy, outlays increased by roughly $60 billion in "other" items relative to baseline because the Treasury revised up its estimates of the subsidy cost of student loans, and to a lesser extent housing, it guarantees.

Here is the CBO explanation:

Outlays for the Department of Education rose by $31 billion (or 51 percent), because the department revised upward, by roughly $39 billion, the estimated net subsidy costs of loans and loan guarantees issued in prior years—a change much larger than last year’s $7 billion upward revision. If the effects of those revisions were excluded, outlays for the department for the first nine months of fiscal year 2017 would have fallen by $2 billion (or 3 percent).

 

Outlays for the Department of Housing and Urban Development rose by $29 billion, primarily because the department made upward revisions in June 2017, but downward revisions in April 2016, to the estimated net subsidy costs of loans and loan guarantees issued in prior years.

The cost of those loans is treated in the budget on a present value basis, not a cash basis and the Treasury periodically revises these costs. (It should be noted that the associated increase in outlays doesn't impact Treasury borrowing or debt under the debt limit.) If not for these special factors, Treasury would have reported another small surplus for June... however it did not.

On the revenue side, things were just as bad with the US Treasury collecting only $338.7BN, just 9% higher than the $330BN in June of 2016.

What makes the surge in the deficit especially surprising is that June is often a surplus month, as the Treasury receives large corporate and non-withheld individual tax payments in that month.

One theory explaining the shortfall in revenues reflects taxpayers delaying the recognition of income in 2016, anticipating tax cuts this year. That revenue should eventually be recovered. About a third of the revision was on the outlay size, with a large chunk due to changes in the estimated subsidy costs described above. Based on the CBO revisions, it appears that the deficit for the fiscal year, which has three months left, will be in the $650 billion to $700 billion range, if not even higher, mostly due to the surge in "subsidy costs of housing and student loans" guaranteed by the Treasury.

Combining these two means that YTD, the deficit jumped to $523.1BN vs $399.2BN last year.
While many analysts had a deficit base case for fiscal 2017 at roughly
$575BN (the year ends on Sept 30), the CBO recently revised its
projection for the fiscal 2017 up by $134 billion to $693 billion. Most of the CBO revision reflects weaker than expected revenues, which means it will be even more surprised when it finds out what is going on with outlays.

To summarize: what the unexpected surge in government spending means is that quietly and mostly behind the scenes, the student debt bubble has begun to burst, and the Treasury is "provisioning" for it in real time, with all US taxpayers once again on the hook.

Finally, since the $1.4 trillion and rising student debt bubble is expected to end up with discharges of 35% if not higher, it means that over the next several years, the budget deficit will be incrementally boosted by approximately $500 billion as America's taxpayers are once again taken to the cleaners, this time to bail out millions of liberal arts majors who for one reason or another just can't pay back their student loans.

h/t @SMRA

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HRClinton's picture

Tyler, did you lose the Countdown Clock to Project Mayhem?

Just burn it all down and start over. 

Giant Meteor 2018, please. Pretty Please. With sugar on top.

HardAssets's picture

Ahhhh . . the plan is working perfectly.

- Dumb students down in K-12 by not teaching critical thinking skills & real history.

- Entice them to go heavily in 'debt' (made-up-credit-outta-thin-air) for college, while destroying U.S. domestic industry. There are no jobs when they graduate.

- Young people can't start a decent life, can't have a family. Their 'debt' is too heavy.

- They are the perfect target to entice with 'free' tuition, 'free' health 'care', a minimum 'living wage', etc, etc. All the socialist collectivist crap that the idiot Bernie Sanders pushed.

Final Result: neo-feudalism and a generation of serfs who don't know they're serfs.

OverTheHedge's picture

Think of your list of "free" stuff as helicopter money. Bring back Ben!

DaveA's picture

No, they're not serfs. Serfs have useful skills -- they can build simple huts, spin fibers into clothing, raise livestock, and grow food. After seventeen years of education all our kids can do is write essays on genderqueer intersectional power relationships.

ParkAveFlasher's picture

Whoops, forgot to carry the ten...I do that all time.

But honestly, the ones working on the report (and issuing updates) likely are in student debt and living in subsidized housing.

J S Bach's picture

Conservative Arts would be a more lucrative study.

Stuck on Zero's picture

I like that idea. Conservative arts classes: prepping, canning, weapons maintenance, bomb shelter construction, getaway packing, primitive machinery manufacture, hunting skills, and fake news detection.

helloimjohnnycat's picture

For us able-bodied humans, much comes naturally.

Who needs Jewdison Ave telling us anything ?

Or the joo-kike MSM hook-noses calling us anti-semites when we Squeeze the Charmers.

Jews are NOT white.

WHITE people, especially WHITE AMERICANS,  need to disconnect all jewry from our lives.

It's the right thing to do.

Jews need their own country and they have one.

Oh, but the greedy bastages need more.  OK, what portion of America should became Izzy-West in that you guys call all the shots, but only for fellow joos ? ( I propose the I-West flag be Isreal's but with the gold-fringed borders. A very admirable look it would be.

Most joo-bait couples I know divorced after a few years. Many of the couples remaining married are " husband - bearded wife " in appearance only. Smart, but Gutless ! We've always known why & what for.

Point is : These J-suckers can't stand living with themselves, yet continue telling us what to do, whom must be housed next door, how to act, and ALWAYS that WE must pay the joos' way thru Life.

Now then, will you idiots out there please quit cow-tailing to the joo-rat Finklesteines ?

Tell them to FO, take a kike-hike, read the US Constitution, raise the rents on each other, and Have a Nice, Rabbinical Day.

We had eight full years of their magic-negro mystery meat blabbin' the tribes' line of company BS and fomenting racial anxiety.

Stop. Life is too short.

And for the nasty joos always trying to buy my real estate for half-off.... Stop.  No U-Haul until U-Punks Pay Up.  Easy enuff !

I didn't inflate the market and I'm certainly no joo-scum central banking counterfeiter. Your appraisers set the taxable value so that's the price !

BTW, banker heebs want the next downturn. That's the jews' way of existence. Rise, Fall, then rise from the ashes.

Mosey / Moses around for decades, settle, kill, be killed, enslave, be enslaved, have a Holodomor Nothing Feast with Old Mother Hubbard's po' dog, Loan a Hitler a fortune, Go to Auschwitz & HIDE from your own Joo-created Major Oops in that you yid-kids overplayed your Hidden Hand so circle the skeletons and pretend ya'll beez da' victims and were gassed 3,4,5, X^ times ! After all, wasn't champagne & caviar being served in Stalingrad & elsewhere ?  Certainly the finest vino was poured on Normandy Beach ?

There's no denying, commies won WW II. Problem needs to be resolved.  Easy way or the old-fashioned way. Easy is smarter. U-Haul will beat and everybody makes money.

 

 

 

 

Shitonya Serfs's picture

If it's all play money anyway, why does it matter anymore?

peopledontwanttruth's picture

Nothing shocks the seasoned ZH reader anymore. We're expecting

Only shocked it stopped at 429 billion

Give Me Some Truth's picture

And this is the figure they release. Who knows what the true figure is?

RougeUnderwriter's picture

bit coin to the rescue

Iconoclast421's picture

"just 9% higher than the $330BN in June of 2016"

 

WTF? Just 9%?

83_vf_1100_c's picture

Practicing flawed math on accurate .gov figures is double plus ungood. You have been warned.

Northern Flicker's picture

Actually it was 2.6%, but right, what do they expect?

Don Sunset's picture

The US DEBT CLOCK doesn't seem to be moving much although US deficit spending is apparently roaring away!  Very fishy, but I'm not surprised as most things related to finances and accounting have been solidly rigged for at least a decade.

Just Another Vietnam Vet's picture

 

Thats what happens when for the last 16 + years a BALANCED BUDGET is not even in the lexicon of legislatiors. 

Wacked out locos running the US have gone from a FIVE TRILLION debt a 20 TRILLION debt in TWO administrations.

Fighting and inciting wars across the planet while bankrupting the country to discover WMDs that do not exist.

Barry and Hilliary playing a massive billions of dollars pay to play scheme, all the while allowing terrorists in

the US without restriction...and. citizens must suffer the unaffordable costs of so many crooked schemes.

The same goofy folks that created a unworkable, unnecessary, unaffordable gov required health plan, ACA.      

DIMS have ground up Illinois till its INSOLVENT, CA is close behind,  followed by a few others.

And the left tards .. still FREAK OUT .. about the GLOBAL WARMING and the TRUMP RUSSIA fiction. 

 

Wait till the currency starts to collapse.........................................!!!!!!!!!!!!!!

For sure, the mindless Wawapoo and CNN will blame it on the DONALD

 

And some will say its  Donald and the Russians that are causing the yellowstone earthquake swarms..........

just like these rock heads believe the US can stop global warming and

somehow the US has unlimited resources and abilities. 

 

 

animalspirit's picture

The debt ceiling limit, which had been suspended during the Obama administration, is restricting further borrowing ... and thus, no new debt. At least, not on the books.

So instead what they are doing is taking "extraordinry measures". What this means is moving some extra cash in the left pocket over to the right pocket, and paying bills from that. This has been done over and over. Once the debt ceiling can be raised again, new debt equal to all the spending during the period of extraordinary measures gets added all at once.

So that debt clock should be approaching $21T right now, but thanks to the extraordinary measures, the fake numbers of 19.9xT remain. That will change in the next month or three.

Give Me Some Truth's picture

Re:  "Debt clock SHOULD be approaching $21 trillion right now ..."

And will be "reset" in three months or so ...

This is correct and is rarely mentioned.

BTW, on the day that the debt clock is reset and we are shown that the debt is actually $21 trillion instead of $19.9 trillion ....

you can be certain that the price of silver will plunge by 4 percent.

See I now know how these guys work.

roadhazard's picture

Thank gawd we still have $45 Billion for Opioid abuse.

peopledontwanttruth's picture

That's the CIA budget in afganistan

Give Me Some Truth's picture

Re: That $45 billion for "opioid abuse."

I wonder how they picked the figure "45 billion" needed? Why not, say, $43 billion? 

Anyway, this is our latest "crisis" du jour. Politicians and bureaucrats love it.

And you make a great point. Nobody came back and said, "Hey, we can't afford it." 

Well, I just did. But I don't count. Plus, we apparently CAN afford it. We can afford anything and everything. It's nice to have the reserve currency of the world and the printing press to print said currency, isn't it?

pparalegal's picture

Meh. California Gov. Jerry Brown lost the MediCal bill for over a billion the other day. Said it fell on the floor in the bookeepers office. Sorry.

Miffed Microbiologist's picture

The sad part I see is my interns are carrying massive amount of student loan debt but don't really care. They see my high salary and feel safe. When I tell them my job will be fully automated in 5-10 years they have a look of horror. They always ask what to do but my recommendations are never taken seriously. Reality will come and sadly I cannot help them.

Miffed

VoteSmarts's picture

The numbers of graduates who were Smartly raised and applied themselves and their Common Sense to life paths see their way clear to accept personal responsibility for their loans and education and repay their loans, period. There is only the bleeding-heart libtard *reason for even considering a bailout for the other numbers of graduates who refuse to grow up into a recognizable level of maturity and self-reliance. Man, all this bailout BS really ticks me off, because it's So Wrong! Where the hell is Darwin when ya need him.

serotonindumptruck's picture

It seems as if the number of under-qualified students who were accepted into university during the past ten years or so have exploded. The ease by which federal student loans have been awarded has created a feeding frenzy amongst college adminstrators everywhere. Many of these students who accepted these loans had absolutely no intention of ever paying them back. It was just free money to them, future consequences be damned.

indygo55's picture

Smartly raised?

Fuck off 14 weeks and 5 days.

How about no jobs? How about the financial repression that the country has been afflicted with since the FED took control and made our money out of debt? How about the 97% loss of purchasing power as the rich only get richer and the 99% go into poverty? That's because they get the money first and for nearly free as they collect assets with free money created out of thin air and then charge the "people" to pay it back or rent it to us. Open your eyes if you even are able and look around. Those of us who have been around here have a very different perspective then fools like you. Either you are a troll or a fucking stupid idiot.

The lenders took the risk. Students are by definition sub prime borrowers. The non discharge clause is only a speed bump to this collapse. If you don't like the risk don't make the loan. And you talk about Darwin! Fool!

 

MEFOBILLS's picture

 afflicted with since the FED took control and made our money out of debt?

 

Banks have always issued their Credit.  It used to ride on top of gold.  To intermediate imbalances between banks, gold flows would be used.  Or, sometimes they used treasuries.  Banks created credit before the Federal Reserve.  OK?

So, debt money has been around for a long time.  The first debt spreading bank was Bank of England in 1694.  

Bankers made their notes good for paying taxes and debts.  You should focus on that instead of the FED.  The FED is a creation of the private banking system.

hongdo's picture

" If you don't like the risk don't make the loan."

Did you read the article?

The banks made the loans because they had no risk.  YOU guarenteed the loan.  All the students thank you.  And now you are paying it back (which is the whole point of the article).

Scornd's picture

you are right lets not fight each other tho. its the money. and socialism.... ahhh hell let it burn but put hate where hate belongs lol

order66's picture

Not to mention bailing out the 1 million red state high school dropouts who took on 50k to get a degree from DeVry or University of Phoenix.

syzygysus's picture

I know several DeVry grads from the late 90s that pull in 110-120k a year. Not bad for what you consider a shit degree. Maybe its what you put in it?

Scornd's picture

haha they made that in the 90s? or now? thats needed information...

Fartboxbuffet's picture

Burn baby burn burn the mother fuker down its a fed inferno

Aireannpure's picture

Write it off and start lending again. These important colleges and professors need more money. There is never enough money for education. The children are our future. This is just a small bump in the road. College is a long term investment. Pay it forward. $58 dollars needed to collect $1 student debt. Stop this waste now. As far as car loans? not so much...

snakedogs's picture

How many more years do the millenials have using the loans for their Spring Break debauchery while earning a degree in Liberal idiocy?

daveO's picture

Then there are the communists who expect a gov. job for all their protesting.

NYC_Rocks's picture

Another criminal act in government.  They tax us or go into massive debt (future tax) to loan money to people who don't deserve it and don't have to pay it back.  Government is a disgrace to all the hard working people in this country.  Same with healthcare - tax and print and give it away to those who don't take care of themselves or to an inefficient system that is burried in regulation and over testing.  Death by a thousand cuts.  Just watch our debt grow and lead to a currency collapse within next five to 10 years.  Can you say massive restructuring?

BadDog's picture

You be a printer, now go buy some ink and print some more of that s$*t.  To Live And Die In LA.

directaction's picture

If the US government destroys America then it is good for the future.

The government knows what is right way better than we do

Cordeezy's picture

So more expensive colleges = higher loans + worthless degrees = government bail outs of defaulted loans that people cant afford? is that what this is saying?

 

www.escapeamazon.com

 

Scornd's picture

the entire system exists to monopolize every aspect
of education as workforce labor,NOT more competiton... and its bank families that control- everything. fucking everything.from govt regulations to school curriculum and all persons inbetween...... not a revolving door-- a loop d loop rollercoaster. because money is the means of control. they know money is fiction. but getting people doing what you want?

priceless.

micksavage2010's picture

why don't u responsibility freaks apply the same optics for the banksters and the military?

RichardParker's picture

Because they are brianwashed by the MSM into believing that if the banks are not bailed out for their profligate recklessness/chicanery, millions of people will suffer. 

However, the truth is that bailing them out not only enables their recklessness but has forced tens of millions of people to suffer instead.

Next time you meet a responsibility freak, ask them how many people went to prison for 2008.  I guarantee it will make them STFU.

 

creeko's picture

You'd think people would be angry at banks and lending institutions for creating money out of thin air, lending it out, and expecting the taxpayer to bail them out when their bets go bad.

MEFOBILLS's picture

You'd think people would be angry at banks and lending institutions for creating money out of thin air, lending it out, and expecting the taxpayer to bail them out when their bets go bad.

 

People cannot even understand the simple concept you mention.  When the Government pays the students loans, it is paying the private banks.  Said private banks have often already made their usury two or three times.  So, paying the loan is stealing from taxpayer to then fund financial oligarchy.  

Of course, politicians in the government are often stupid, or on the take.

One suggestion is to bundle the student loans together, then go to the banks and say - negotiate or we will use an executive order and erase the debts.  

If Trump does an erase, then he will for sure be re-elected.