US Government Spending Surges 17% Pushing May Deficit 70% Higher; There Is Just One Problem

When the Treasury reported its monthly receipts and outlays data for the month of May at 2pm today, it was more of the same: far more spending than receipts, resulting in a 68.4% surge in the US budget deficit compared to a year ago. Specifically, outlays of $329 billion soared 19% compared to a year ago, offset by a modest 7% increase in receipts, resulting in a $88.4 billion deficit in May, more than the $87 consensus estimate, and well above the $52.5 billion a year earlier. The reason: government spending in areas such as Medicaid and defense rose at a far faster pace than revenue.


Year-to-date, the US deficit was $433 billion for the first 8 months of the year compared to $405b last year, with year-to-date receipts rising 1.4%, or roughly 60% of the 2.3% increase in outlays.

There was one silver lining: after contracting for 4 consecutive months at the beginning of the year, 12-month cumulative government receipts managed to eek out two consecutive months of growth, and rose 0.4% in May.

There was a notable footnote: the Treasury received $8.4b from the Fed in May in deposits of earnings, and $56.5 billion year-to-date as the biggest Pyramid scheme of all time continued, with the Fed remitting billions to the Trasury, artificially boosting the government's "tax revenues."

And yet, despite the ongoing growth in the US budget deficit as tax receipts fail to keep up with government spending, a problem has emerged: as shown in the chart below, on an LTM basis, government outlays - the same outlays which soared during the financial crisis to pull the US out of the 2008/2009 hole - have been sliding, and after growing at a 5% annual pace three years ago, are almost back at the flatline as the government, believe it or not, is not spending nearly enough to keep the economy growing.

At the current rate, government "stimulus" is poised to turn negative some time in the next few quarters, if not months, effectively resulting in a drag on the US economy, one which comes at the same time as private sector loan creation is also set to turn negative as we highlighted over the weekend.

In other words, with the US economy potentially on the verge of a recession, government spending is, surprisingly, not enough to keep the economy from contracting. And making matters worse, with Trump in charge, and a deeply polarized Congress, any possibility of a sharp spending boost if and when the needs arises, appears very much in question. In other words: keep a close eye on government outlays - as big as they are, they may not be big enough to keep the US from sliding into the next recession.


Deep In Vocal … Mon, 06/12/2017 - 15:15 Permalink

bigger government less freedom....trumpers still think he's going to shrink it.......shakes head.... just sitting here watching as the population orbits into oblivion.....zombie nation

Endgame Napoleon Ben A Drill Mon, 06/12/2017 - 17:48 Permalink

Oh please, I have never filed anything any place where I worked, not even for Unemployment Compensation. I came to work every day, stayed all day and met their d****d quotas, often ending up as one of the employees generating and retaining the most sales, both from the standpoint of number and profit margin. It did me no good whatsoever except in a couple of cases where the manager was not a family-friendly babyvavationer, indulging the absentee-momma clique. There were a couple of other types of crony cliques, too. It is not always the mommas. And no, I did not complain about these absenteeism cliques, which was probably a mistake. They are low-energy barracudas. The truth is that one person's sales means nothing to them in the Automation Age unless you are a manager, providing some other things.

In reply to by Ben A Drill

Endgame Napoleon grasha87 Mon, 06/12/2017 - 17:52 Permalink

Free trade is not really free, nor is comparative advantage comparative. It is like comparing apples and oranges to juxtapose the expenses of a factory paying people $17/hr with a factory paying people $1/hr. As a Main Street shop owner, I did not have the "freedom" to buy the "comparatively" slave-made goods from offshored factories in bulk quantities at the same discount rates paid by the big-box retailers.

In reply to by grasha87