Presenting The Truth Behind America's Fiscal And Employment Picture

Tyler Durden's picture

Two weeks ago we penned "As US Debt Hits New Record, Fiscal 2012 Tax Revenues Are 10% Higher Than Debt Issuance" which unfortunately was very wrong: we completely forgot that tax revenues in the US are a two way street particularly from January through the end of tax season on April 15, when income and employment tax withholdings are offset by tax refunds as consumers rightfully claim (and in the process pad TurboTax revenues simply for having under-exempted themselves) what was overcollected by the government. Unfortunately, it also means that we showed the US in a far better fiscal light than it is in reality, because contrary to our conclusion that tax revenues are higher than debt issuance in fiscal 2012 (starting October 1, 2011), the reality is not only a mirror image, but worse, with total debt issued now surpassing net revenues (withholdings net of refunds) by a whopping 15%! In other words, for $710.7 billion issued in debt YTD (debt has risen from $14.79 trillion to $15.5 trillion), net tax revenues have risen only by $607 billion. Which means that contrary to conventional wisdom that the US collects in taxes modestly more than it issues, at least through the peak of tax refund season that is certainly not the case. It also means that little by little that neo-Keynesian ideal (where we hope we jest but are no longer sure) of all deficits being funded purely by debt issuance, is slowly coming true.

The chart below shows next tax revenues vs debt issuance YTD - go ahead and check: subtract year to date tax refunds from tax withholdings as of March 1 (link) and compare to debt issuance since October 1, 2011 (link).


But wait, it gets worse.

Remember all that talk of a US employment based 'renaissance'? By definition, that would mean that more tax revenues have to be collected YTD compared to 2011, during which period the unemployment rate was logically far higher - after all it is a declining continuum, or so the BLS would have you believe. Because more people employed, means more taxes collected. Logic 101. Well, wrong.

As the next chart shows, comparing net withholdings, or total taxes withheld net of tax refunds, 2012 is now trending below the same period in 2011, by about $10 billion!

As a reminder, here is how the unemployment situtation stood at January 2011, when according to the BLS 130.5 Million people worked, when net government tax revenues were on par or better than 2012...

And compare this to the latest employment "data", when once again according to the BLS, 132.4 Million people worked.

So let's get this straight: America has seen the number of people employed rise by 1.9 million people from January 2011 to January 2012, and its unemployment "decline" by 0.7% in the same period, which means more taxes paid and thus withheld, and yet the tax collections have dropped from a period when unemployment was 9.0%?


Naturally, skeptics will say that this is purely a function of frontloaded tax refunds. Which would be great, however it is not true.

Stone McCarthy deconstructs that myth as follows:

Cumulative individual income tax refund issuance for 2012 passed issuance for the comparable period last year for the first time in the latest week. In the week ended last Friday, income tax refund issuance totaled $26.6 billion, compared to $20,9 billion last year. That brought cumulative issuance to $85.4 billion, up 5.7% compared to the comparable period last year.

Today's Chart of the Day shows cumulative refund issuance through February 17 and for the comparable period for 2012.

Refunds are lagging our forecast, however. We had projected cumulative refund issuance of $102.3 billion through February 17. We forecast total refund issuance to be up 2.6% compared to last year. However, we expected more refund issuance early in the refund seasons compared to last year, when some returns didn't get processed until after February 14.

Refund issuance this year has been delayed by a different set of problems. As we have noted in our prior updates, the IRS has made changes to its systems to prevent fraud, and that caused refunds to go out more slowly than expected in the first few weeks of the refund season. The IRS appears to be catching up, but hasn't said so explicitly. The "Where's My Refund?" page simply now says taxpayers who file electronically can expect their refunds within 10 to 21 days. It will take another week or two before we can start to make reasonable comparisons between refund issuance this year and last year.

Finally, even if in reality the government is somehow goosing (i.e., frontloading) refunds, all it means is that cash available to US consumers is higher than where it should be in reality, as all that has happened is that the variable responsible for 70% of the US economy has obtained more cash earlier than when it should have been disbursed. Which in turn means that the recent Personal Income and Spending data, which was so disappointing it caused Goldman to lower its Q1 GDP tracking forecast (and that is even before the gasoline price shock), is even worse when one factors out the time effect of refund collection - traditionally an economic boost as the cash is spent as quickly as it is received.


So.... what is this about the US economy improving again?

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Timmay's picture

Dead horse, meet beating. Beating, dead horse.

economics1996's picture

If we had no central bank, gold/silver reserves the federal government would not be able to destroy the country.  When the fiat collapses and the federal government no longer exists everyone needs to insist on 100% fractional reserve banking backed by gold/silver. 

Fucking bull shit has gone on too fucking long.

tarsubil's picture

It seems another critical point is, if you are going to define the dollar Constitutionally, define it in either silver or gold but not both. Let the market decide the proper ratio between the two.

tarsubil's picture

I don't think the dollar was ever defined in terms of only silver or only gold, was it?

Michael's picture

If you want to get perfectly technical about the national debt, that 15.3 trillion in debt belongs to The Corporation of the United States of America, not the American people.

We the people protected ourselves from a runaway federal government and its un-sustainable buildup of debt by passing The Act of 1871, making the Federal government a corporation unto itself, thus absolving the non-corporate entity's, sovereign people of the USA, from being responsible to pay the Federal corporate debt.

This short film explains a lot about it;

UNITED STATES is a Corporation - There are Two Constitutions - Sovereignty   

TruthInSunshine's picture

OT, and I will post it in another thread, as well:


David Stockman has gone all in on calling the Federal Reserve 'out of options' and stating that the shit's going to hit the fan (if you don't know Stockman's resume, you should, and this is incredible stuff).

Is he right, wrong, lying, putting a warning out there....????

And yes, he owns gold, saying essentially that it's risk free, and will important to hold in the period that lay ahead.

I don't know. I know he was as high ranking as it gets as an economic adviser to a sitting President of the United States.

I know that when someone like this comes forward in an intentional shout out in the loudest way possible, through the AP Wire Service (which makes its way onto every front page of every newspaper), something is probably afoot:

 David Stockman economy Q&A: Economic disaster in the works 



Stockman: "Here's the heart of the matter. The Fed is a patsy. It is a pathetic dependent of the big Wall Street banks, traders and hedge funds. Everything (it does) is designed to keep this rickety structure from unwinding. If you had a (former Fed Chairman) Paul Volcker running the Fed today 7/8— utterly fearless and independent and willing to scare the hell out of the market any day of the week — you wouldn't have half, you wouldn't have 95 percent, of the speculative positions today.

Q: You sound as if we're facing a financial crisis like the one that followed the collapse of Lehman Brothers in 2008.

A: Oh, far worse than Lehman. When the real margin call in the great beyond arrives, the carnage will be unimaginable.

Q: How do investors protect themselves? What about the stock market?

A: I wouldn't touch the stock market with a 100-foot pole. It's a dangerous place. It's not safe for men, women or children.

Q: Do you own any shares?

A: No.

Q: But the stock market is trading cheap by some measures. It's valued at 12.5 times expected earnings this year. The typical multiple is 15 times.

A: The typical multiple is based on a historic period when the economy could grow at a standard rate. The idea that you can capitalize this market at a rate that was safe to capitalize it in 1990 or 1970 or 1955 is a large mistake. It's a Wall Street sales pitch.

Q: Are you in short-term Treasurys?

A: I'm just in short-term, yeah. Call it cash. I have some gold. I'm not going to take any risk.

Q: Municipal bonds?

A: No.

Q: No munis, no stocks. Wow. You're not making any money.

A: Capital preservation is what your first, second and third priority ought to be in a system that is so jerry-built, so fragile, so exposed to major breakdown that it's not worth what you think you might be able to earn over six months or two years or three years if they can keep the bailing wire and bubble gum holding the system together, OK? It's not worth it."

WonderDawg's picture

Interesting stuff there, TIS. Same thing I've been thinking and using as a basis for my strategy for a couple of years now. I've missed out on some captial gains on the way up, but I fully expect to make up for that playing the short side when the time comes. I think the time is very very close.

cranky-old-geezer's picture

We the people protected ourselves from a runaway federal government and its un-sustainable buildup of debt by passing The Act of 1871, making the Federal government a corporation unto itself, thus absolving the non-corporate entity's, sovereign people of the USA, from being responsible to pay the Federal corporate debt.

If you have a social security number you are firmly in that corporate government, legally, or any way you wana look at it.

If you don't have a social security number, it doesn't matter, they assume you're firmly in that corporate government by virtue of using its currency and other trappings.

Good luck getting any court in the land to rule otherwise.

And no, you can't merely claim you're no longer part of it, it takes a court order.  And good luck getting such a court order.

Michael's picture

You're not claiming the American people are in reality feudal surfs beholden to a fascist government are you?

I don't think there's any court in the land that will admit to that.

cranky-old-geezer's picture



You're right, no court would come out and say it.

But no court will give you the necessary court order to get out of it.

Good luck trying.

ChrisFromMorningside's picture

You actually think they care about the law. Cute.

economics1996's picture

Opps 1873.

 The Fourth Coinage Act was enacted by the United States Congress in 1873 and embraced the gold standard and demonetized silver.Western mining interests and others who wanted silver in circulation years later labeled this measure the "Crime of '73Gold became the only metallic standard in the United States, hence putting the United States de facto on the gold standard.

Cadavre's picture

More like "before time was time itself."

No disputes like 1877's these days. The next group of leading and bit characters to have their CSPAN contracts renewed is slated well before the first touch of a snot smeared  touch screen. Today, election desputes are resolved by design - no paper - and we all know Judge Judy won't play unless you got a receipt.  When you use a paperless digital voting machine all you're doing is pressing a a button that does nothing more than check a box or turrn a page - nothing is recorder - but it sure makes us feel "American". Don't it?

Regarding article topic .. but looked a couple of times and . well ...

Is the IRS borrowing to pay 2011 refunds?

Be nice, or would it be? Scary and a confirmation at least to stack in a debt servic or scarier yet all all payments.

It gets expensive:

.5 Billion / day to top of Marine gas tanks in Afghanistan (the beauty of no bid cost plus KBR wouldn't contract AL KADA to imped fuel deliveries i would they?_

Over 400 thousand small arms rounds to kill 1 alleged Iraqi resister (one can never be too sure - they're known to play possum after eating the first 300K - wiley rascals  - exclude children and Italian reporters)

Over 300 thousand small arm rounds to kill 1 alleged Afghanistan resister (excluding pat tillman and seal team VI post success postmortem heli-crash in some remote pass and no eye witnesses)

And them DU slugs fired by GE gats at 2 to 20 K/ minute - ya know those babies are hitting 3 figures a pop to deliver. They got Iraq glowing in satellite x-ray images and human frog babies gracing anybody around that stuff.

And nothing dropped from a drone or plane is less than 100K.

And lastly, lest we forget, the FICA withholding ruse is slamming SS. SS is  a big cash utter and congress sucks it empty at every feeding opportunity by swapping  negative yield treasures to the tune of nigh near .4 Trillion a year in currency credits. I guess the Cong will instruct SS to redeem the old notes back to market at a loss to book and then use the proceeds to buy new baby lower yield notes at a premium. Margin stands - the gift that keeps on giving.

Where are they getting all that money from?

Cadavre's picture

Preparing fast food orders is a manufacturing job.

Ammortized bonds deemed "held to maturity" are marked to book value.

Amortized bonds deemed "available for sale" are marked to market (value).

The FED excludes fuel and food from inflation.

The FED fudges inflation by deeming all mortgages as "available for sale" and mark the asset to market. Not on basis of actual transactions - just some invented funny fuzzy statistical determination. No body buying foreclosed except, and thank the tiki on the hill for the "recovery" rescue bu the fuzzy math behind the inflation pig in a poke print deflate-booster-shot from: Our very famous federal NGO mortgage insurance program payouts. Americans are on both sides of the counter with the banks and DC Bus Boys in the middle.

Why didn't I think of that!

And talk about wet policy termination chum bait - how `bout them reverse mortgages!

If corporations are people, then people are corporations. Wal Mart rank and file should be able to buy wet policies on Wal Mart managers and execs just like Wal Mart  Corp buys on its rank `n file! Be a rash of BMW and Mercedez one cars for sure - we be seeing lots o new name tags pinned to new ties turning up behind the second level glass enclosing the adding machines.

jwoop66's picture

Whoever it is that wants to unionize "phone center" workers is a fucking tool and an idiot(useful).   If it is you, john, go the fuck away- we have enough collectivist tools on this site.   

Unionized  phone workers... You gotta be kidding.   That is the problem in a nutshell.

trav7777's picture

that chart suggests a few more years of rising SP

CompassionateFascist's picture

Thanx for dupe, Trav...opportunity to add xtra junk.

Silver Bug's picture

Sadly the problems are only going to get worse. Hold tight to your gold and silver.

duo's picture

Interesting to note that MZM and M0 have increased more in the last 4 MONTHS than total M0 or MZM in 1980.  Someone tell me how that can't be inflationary.

That's a telltale sign of impending Weimar.

RSloane's picture

There's so much data NOT being reported by our MSM or on business channels like CNBC  that if it weren't for the internet, which the government passionately wants to control, we would be forced to believe that we were living in the middle of rosey glory days and if you weren't happily employed and spending your ass off, something was wrong with you. 

Dapper Dan's picture

Spiral eyes thank you for the link,

I found this comment in the link provided very interesting.

Buddy Rojek
Mar 03, 2012 @ 08:08:30

Hear hear!

When are we going to meet up in Davos, hopefully get some funding from an Oligarch for a new grass roots political movement. You cover UK, I will cover Australia.

BTW I am still waiting on Zerohedge membership where I can use my name and connect with a bigger Australian Audience. I only need 500 registered voter Australian members to register a new political party.

luna_man's picture





Come on guy's, "beating" isn't doing the trick!  Give me a hand, we'll just drag it where we need it.

JPM Hater001's picture

Um, I'm gonna need to borrow the head when your done.

Stack Trace's picture

Just in from a meeting with a new client yesterday (client is fortune 100):

In response to my statement of cost for a small project the project sponsor asked if I was too expensive or if it would be cheaper hiring (Indian IT firm, name with-held)  to do the work manually. The PM responded: "That he is still cheaper than hiring 10 'habeebs' and she thought it would be a headache managing them."

There you go. Just remember you have to be cheaper than 10 'habeebs" to get a job these days.


BTW: this is not hyperbole. It is a precisely true exposition of what a small business faces these days in this country. Pathetic.

nmewn's picture

(sound of phone ringing)...Hello, dis is Raji, er Roger. May I have your account number please?

candyman's picture

No trickle down in my bus. yet, but, i'm in negotiions about fees getting tighter. i tell them FU your with me or your gone. Its a nice way to clean up the book. Stop thinking you are going to retire with one f'ing client.Get off the desk and move on.

candyman's picture

No trickle down in my bus. yet, but, i'm in negotiions about fees getting tighter. i tell them FU your with me or your gone. Its a nice way to clean up the book. Stop thinking you are going to retire with one f'ing client.Get off the desk and move on.

davey's picture

I'm seeing severe deflation in my business. Every time a contract comes up for bid the prices are getting lower every year.same amount of companies bidding on a smaller pie. Meanwhile I see inflation for steel fuel and parts as well as healthcare insurance. I think the proper word for today is "DEFLATION"

RSloane's picture

Hello, my name is Peggy....

ExpendableOne's picture

I run finance systems deep in the "engine room" of a large partnership.  Clients have been renegotiating rates very agressively for the past 3-4 years.  We spend a lot of effort on formatting bills to show what our costs are and what the client ultimately paid.  Everyone wants a "deal".

GeneMarchbanks's picture

'So.... what is this about the US economy improving again?'

S&P will over rule all reality from here on out. Appreciate the effort though.

Shocker's picture

If this is recession, I don't even want to think what a recovery will look like.

Nothing since 2008 has been address, to say ok we are heading in the right direction.

Snakeeyes's picture

Nothing will help. We are now too overly regulated, too union friendly and we have a tax crazy President who thinks that imitating the 1950s Soviet Union is a great idea.

Besides, employment to population is at 58.5% has been so almost for Obama's entire Presidency.

The Swedish Chef's picture

"So let's get this straight: America has seen its unemployment "decline" by 0.7% YoY, which implicitly means employment should have increased, which also means more taxes paid and thus withheld, and yet the tax collections have dropped from a period when unemployment was 9.0%?"


Fully possible. Welcome to the McEconomy.

Conman's picture

Yup, Losing a 100k+ job during the crash to gain back 2 20k McJobs would make that math very possible.

PrinceDraxx's picture

That is correct and it's only because the rich won't pay their fair share of taxes. Oh, by the by, next year rich will be defined as:

You make more than 10% over minimum wage.

Your tax rate may be up to 100% of the overage. Windfall know?

Conrad Murray's picture

For anyone interested in contacting the IRS, whether by phone or in person, here is a convenient list of all their office locations: http://www.irs .gov/localcontacts/index.html

Anyone named Jos eph St/ack need not view.

Shocker's picture

Got to love how numbers can be manipulated.

decon's picture

Just like people, if you torture numbers enough they'll tell whatever you want to hear.

The Swedish Chef's picture

It´s not torture or manipulation. If someone goes from building McMansions for 120K/year to flipping McBurgers for minimum wage there is no magic behind the drop in income and thus taxes paid. It sucks that numbers reflect reality but this is the truth. Get used to making less and less money, it is whats in store for us in the west.



ViewfromUndertheBridge's picture

Also now outsourcing white-collar $120k jobs to India...accounting now a huge target for outsourcing.

When they came for me there was no one left to speak out for me...oh the humanity... the irony.