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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Bill of Rights's picture

After seeing what the Kunucks owe, Us debt loads is minuscule.

OCnStiggs's picture

What?! You mean all those kids that got degrees in lesbian and transgender insect art can't find job opportunities in the modern workplace? The devil you say! Someone has to pay!!! Give me my tuition back! WAHHHHHHHH!!! Bernie was gonna waive it anyway until the Russians stole the election and put Trump in. WAHHHHHH!

jamesmmu's picture

Look at DOW, no1 is giving a shit!

 

 

rejected's picture

Look at DOW, no1 is giving a shit!

interpretation:

Look at DOW, no one is giving a shit!

 

 

 

JonNadler's picture

so according to the chart the deficit was only 400 b in 2015? HA HA HA!!!!

Horse Pizzle's picture

The striking reason is US is building F22s and F35s at warp speed.  I see ten per day fly out to Korea.

Anteater's picture

The 'striking reason' has nothing to do with 'student loans'. That's pure optics.

In 2012, the Pentagon's military and civilian employee PII database was hacked.

You can see the dip in 2012 while they scrambled to protect and re-armor all

those milllions of hacked employee withholding and auto-deposit accounts.

I know, I was a defense employee at that time.

In 2013, the Pentagon's defense contractor business and banking database

was hacked. You can see the dip in 2013 while they scrambled to protect

and re-armor 100,000s of mercenary contractor auto-deposit accounts.

I know, I was also a part-time defense contractor.

Since that time, the Pentagon payroll and procurement system has simply

LOST TRACK of where all the money is going! They had 'lost track of' $2.3

TRILLION during Rumsfeld's time, $6.5 TRILLION by Panetta's time and

now Mad Dog is running an $8.0 TRILLION Black Hole of MIA accounts.

Congress had to meet in emergency session to grift up a budget shortfall

of $54 BILLION last Spring, as part of Trump's -$1.1 TRILLION stop-gap.

The losses at the Pentagon, at VA, at ObamaCare are pyramiding faster

than Ken Lay or Bernie Madoff could've imagined in their wildest wet dream.

It's a crowning forest fire, but The Orange One is twittering while it burns,

as Orange Jr meets with foreign spies to bring down elected Fed officials.

Oh look! A Russian squirrel!

 

ChargingHandle's picture

Waiting for the healthcare insurance bailout to keep these insurance companies from insolvency. Next will be the auto implosion. Got gold? Metal Up. 

BrownCoat's picture

"because the Treasury revised up its estimates"

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.  
If not for these special factors, Treasury would have reported another small surplus for June... however it did not.

Surprised that the Deep State is putting out bad news to offset the CBO's favorable budget assessment?  The swamp isn't drained. It could take years to drain it, but it will certainly take more than 1 politician; since Congress (both Blue and Red team) are part of the cabal. 
Jack Oliver's picture

Education spending up by 51% !!!

They have realised that the people aren't quite FUCKING stupid enough yet !!

Vlad the Inhaler's picture

Can someone show me the part of the Constitution where it says the government shall guarantee private loans?

autofixer's picture

The Good and Plenty Clause. It's right there!

Anon2017's picture

Can you show me the part where the government can't guarantee private loans?

Not My Real Name's picture

Really? The US Constitution details the government's responsibilities; anything not explicitly spelled out in the Constitution is reserved to the states.

EDIT: Of course, that hasn't stopped Social Security, Obamacare, federally guaranteed abortions, etc.

 

 

sinbad2's picture

Or bombing helpless countries back to the stone age, and stealing everything.

Scornd's picture

its only for Corporate Fictions to contract with each other FOR PROFIT that is all.

Scornd's picture

i know we are supposed to think the Framers hated the banks and govts but that was a lie. the Constitution for the United States is a Corporate Fiction- does not exist only on paper --100% bullshit. no govt fiction has ever given a real living human anything he didnt already have.

WolfgangCire's picture

the real (not shocking) reason is that the u.s. is demonic.

slicktroutman's picture

The USA has become layers and layers of bullshit built on more bullshit.

Scornd's picture

agreed and acurate and true. and u know who made demons? God... and God had a son, named Jesus. he comes with a sword to destroy moneychangers and their murdering govts... bank on it.

Give Me Some Truth's picture

Medicaid has to be ramping up the deficit big-time. I know this because I simply look at my fellow Americans all around me. They don't look good. I see lots of trips to emergency rooms, doctor's offices, hospitals, home health, pharmacies, nursing homes, rehab facilities, etc.. Actually, I guess you could say:

"I see dead people."

Well, a whole lot of future dead people who's living will be prolonged at great expense.

I see computer digits. Lots of computer digits representing fiat dollars.

Sick Underbelly's picture

There has to be a way to completely be paid in barter, trade, cash, and/or untaxable ways and still survive with a family.

How do I tell the Federal Government to take my tax dollars and NOT pay for:

a) the student loan bailout

b) the 15+ year-long wars

c) the "war on drugs"

d) support of illegals

Please, someone...please show me a way I can direct my tax dollars to something useful in the US.

I shouldn't have to bail someone else out for their choices.

I've just about had enough of all of this shit, supporting criminals, illegals, and student loan fuck-offs with the tax "money" extorted from me.  

They've just about fucked with my "money" for too long, in too many ways.  I'm really fuckin' angry!

 

Anon2017's picture

You can't. If you don't pay and you file a frivolous tax return, you will probably be sent to jail so that the IRS can make an example of you. 

FreeNewEnergy's picture

Not true. You can fuck over the IRS six ways to Sunday (h/t to Chucky Schumer).

First, claim as many exemptions as possible on your W-4 or W-2, whatever it is. It's been so long since I filed one of those I forgot what they are. After that, quit you shit-ass job. Fuck you. You know the job sucks bad air. Just fucking quit.

Lie. Lie some more.

Start up a business from your home. Lose money, take every possible deduction. Have actual clients pay in cash or barter or silver or gold or diamonds, if you're so disposed. Use what's called "amortization of intangible assets." Basically, set up a website, offer a mailing list, get subscribers, assign a value to each one and amortize it over 15 years (worked for me to the tune of a $4000 expense every year for 15 years... I actually used it all and now am thinking of starting another mailing list, doing it all over again, since I'll be abale to earn as much as I want in 2019 (SS rules about income limits when taking early retirement, which I did).

Lie a little more... well, a lot more. Make shit up that benefits you. Car breaks down, business expense. Plumbing repairs, business expense. Heavy boozer... you got it, business expense.

Look, the system is completely corrupt, so be even more corrupt. It's called survival.

Peek into the tax code a little and you'll be amazed at how generous the federal government is to business. Consider incorporation. New York is a prime example: it's actually cheaper to be a business in NY than a citizen (taxpayer) if you know what the fuck youre doing. Most people don't.

In the end, stay relatively small. The government loves to go after people cheating them out of hundreds of thousands or millions. Just chet them out of a few thousand a year, maybe even $20K, $50K. Don't go crazy. Live well within your means. Drive old cars. Fuck them.

It can be done, but you need cajones. Since I'm half Italian and half Sicilian, I have huge, brass ones. I view the government as the bad guys. They are. They're crooks. Be better at it. Treat your friends right, screw the government. After all, they fucking hate you.

Peace. Out.

bloofer's picture

This sounds really great. Seems to me the only hitch is starting a business that earns some income, so you will have something to hide from the government.

Somebody PLEASE tell me how to do that!

OverTheHedge's picture

Have a chat with your bid - do what you do now, but as a contractor. Of course you will lose all those comfy perks.and benefits that came with being an employee....but it might save your boss money, so you could even get a net pay increase, plus all the tax breaks. Different countries, different rules apply; ymmv

slicktroutman's picture

And, they'll send him to a "privatized" prison to boot.

Scornd's picture

this is why this world age is ending. bet on it.

scoutshonor's picture

One thing I do when I need a break from my ass pounding by the gov is to take a leave of absence and go overseas to do medical missionary work.  All tours are non-paid thus no support of the gov machine.

I first went in 1992 because I didn't feel supporting our misadventures in the middle east with my tax dollars was acceptable.  I signed on for a two year hitch thinking--"In two years surely this nonsense will be over."

As you know it didn't end--it may never end.  Now I work till I can't take it anymore and slip off to a mission for 6 months to a year.  What it primarily does for me is provide perspective--that this (U.S.) is not the whole world.  Knowing that not every part of the world is broken is helpful.

Scornd's picture

they way other families in other poor countries is with child prostitution.

Give Me Some Truth's picture

... So the deficits are a lot bigger than expected, and the debt will be a lot bigger than we were told and the debt ceiling debate isn't even discussed, and we are contemplating at least four new wars ... and gold and silver are plummeting.

I'm missing something.

Hohum's picture

Stop whining.  Without the debt, industrial society would end.  No more growth.

 

bombdog's picture

We have an industrial society? I never knew!

runnymede's picture

If generating ad clicks, social media posts, pundits reading teleprompters, sporting events, paying .gov pensions, million dollar week-long hospital stays, conditioning of youths from 3 thru age 23+-, and printing ones and zeros count as industrial, then yes we are an industrial society

sinbad2's picture

Would you care to explain why borrowed money is better than saved money?

I think you have been brainwashed by the money lenders.

Try reading the merchant of venice, before you so eagerly give up your pound of flesh.

Scornd's picture

you say this because you prolly are profiting off of it

geno-econ's picture

A lot of graduates unable to repay college loans will be migraring to other lands where at least cost of living is cheaper, U.S. is sending aide money or there are job opportunities in rebuilding countries we have destroyed, which are numerous.

Bastiat's picture

Some friends just made a 0% interest loan to their grandkid to pay off her student loan.  They don't need the cash, they aren't earning crap on it, so keep it in the family.  So her abusive (in this environment) interest payments won't be subsidizing the rest of that shitshow any more.  Somebody's "A" tranche just shrank.   Hah.  Fuck 'em and the Clintons too.

Scornd's picture

in a place where truth and reality rule, and not here-- absolutly everything done with bank loans from roadbuilding to grandmas false teeth can be funded this way----and the family could even gain wealth (shocking!)

peippe's picture

"Would you finance me?"

"I'd finance me, i'd finance me so hard."

-Goodbye Horses-

NuYawkFrankie's picture

re The US Just Spent A Record $429 Billion In One Month

I can appreciate how bombing wedding-parties in Iraq or Afghanistan don't come cheap... but does that $429 Billion INCLUDE the $50+ Billion that usually goes "missing" on 'Welfare For Warfare Queens' at the PentaGoon in a typical month?

tia.

Ban KKiller's picture

It's not missing, check the usual suspects. White collar crime pays VERY well.

buzzsaw99's picture

all the bureaucrats in d.c. are liberal trump haters.  they will pull this type of shit out of their asses every day.

10mm's picture

Money Badger doesn't care.