Federal Cash Flow

www.fms.treas.gov ^ | 1/7/11 | vanity

[MontaniSemperLiberi]

I’ve spent the last few days harping on FR about how inadequate our planning and budget cutting has been in the new year. I thought I’d post a vanity on what I found this weekend regarding our cash flow situation. . . . .

For next year, according to the federal budget law, the president is to submit a budget no later than the first Monday in February (Feb. 7^th). Congress is to wrap things up by the end of the fiscal year, Sept. 30^th, with each chamber’s appropriation committee passing a budget resolution typically by early April.

However, as most know, last year congress did not meet its obligation to pass a budget resolution, instead passing a continuing resolution. On March 4^th the continuing resolution expires. The House will be in session for 23 days before then.

http://thehill.com/homenews/house/136009-tight-calendar-for-112th-limits-gops-options-on-spending-cuts

The debt ceiling is reportedly to run out sometime in February or March depending on whom you talk to,

http://thehill.com/blogs/blog-briefing-room/news/135617-goolsbee-debt-ceiling-critics-ruled-by-insanity

http://www.breitbart.com/article.php?id=CNG.24aed2d4393365e0c8062dcc2cd184cf.791&show_article=1

February is a bad month for the deficit. For the last twelve months, the cash flow situation went like this,

(millions)

Period	Receipts	Outlays	Cash Flow / Deficit
Dec-09	218,919	310,328	-91,410
Jan-10	205,240	247,874	-42,634
Feb-10	107,521	328,429	-220,909
Mar-10	153,358	218,745	-65,387
Apr-10	245,272	327,962	-82,689
May-10	146,795	282,722	-135,927
Jun-10	251,048	319,470	-68,422
Jul-10	155,546	320,588	-165,043
Aug-10	163,998	254,524	-90,526
Sep-10	245,207	279,845	-34,639
Oct-10	145,951	286,384	-140,432
Nov-10	148,960	299,355	-150,394

http://www.fms.treas.gov/mts/index.html

So where does that leave us? Like a family budget, without going to the credit cards, we have to look at it month by month on a cash flow basis only.

Outlays are fairly stable (compared to receipts). Looking at it month by month, expenditures are: ( http://www.fms.treas.gov/mts/mts1110.pdf , table 4)

Interest on the national debt (to avoid default and increased debt payments) costs about $500 billion per year or about $40 billion per month.

Defense spending costs about $720 billion per year or about $60 billion per month.

Only those two expenses (totaling $100 billion) could be paid by cash in February with no debt ceiling increase. If we get through February without a ceiling increase, things get a bit better in March.

Social Security costs about $800 billion per year or about $70 billion per month.

So if we add in Social Security (totaling $170 billion per month), it could be paid, in part for six months this year, March, May, July, August, October and November. It could be paid in full for five months this year, April, June, September, December and January. Again, in February, Social Security can’t be paid.

There are some discrepancies in the numbers depending on how receipts are counted (on / off budget interest receipts, etc.) so I tried to find as detailed and authoritative data as I could. Those discrepancies are less than 20% of the total. To balance the budget, that’s what we can afford, i.e. interest on the debt, DoD and some SS. Everything else, Medicare, Medicaid, Law Enforcement, etc. etc. etc. is out. We are talking about an "open the prisons" level of cash flow crunch. If we want any of that extra stuff, we either have to raise taxes or borrow the money. A significant but insufficient amount of cash flow could be saved if we were to just fund current military operations rather than the whole defense budget. If we assume 50% of the DoD budget is for continuing operations, about $30billion per month could be saved thus enabling other critical federal operations to be continued, i.e. keep the prisons closed.

That’s how bad it is.

My favorite quote over the weekend was this, "House leaders will then quickly begin to identify tens of billions of dollars in proposed spending cuts and to ease regulations that businesses find burdensome." Tens of billions?

We are tens to hundreds of billions away from financial health per month.

[MontaniSemperLiberi]

This might not be worth a vanity but I thought it was. Flame away.

[bareford101]

it sure was an eye opener for me! Plain and in simple everyday terms. thank you!

[doc1019]

Thanks for the post. ;-)

[Ev Reeman]

http://www.wimp.com/budgetcuts/

[cgbg]

Cash flow is a number that can’t be faked for business or government.

Good post.

[Ev Reeman]

Last Congress Boosted Debt by Record $3.22 Trillion
The federal government ran up more new debt during the 111th Congress than it did during the first 100 Congresses combined, according to the U.S. Treasury.
As of Dec. 28, the national debt had risen by $3.22 trillion during that Democratic-controlled Congress equal to more than $10,429 for each person counted in the 2010 Census.
The total debt stood at $13.85 trillion on that date, or about $44,890 for every man, woman, and child in the country.
The new accumulated debt shattered the record set by the previous 100th Congress, which adjourned on Jan. 4, 2009 $1.95 trillion.
While Democrats controlled the House and Senate in both of those Congresses, the two previous, Republican-controlled Congresses each added more than $1 trillion to the national debt.
The overall federal debt did not reach the $3.22 trillion figure until September 1990, during the 101st Congress, CNSNews reported.
Since Nancy Pelosi assumed her post as speaker of the House on Jan. 4, 2007, the national debt has ballooned by $5.17 trillion.
Yet during her inaugural address as speaker, Pelosi had vowed that under the 100th Congress the government would not burden future generations “with mountains of debt.”
She said: “After years of historic deficits, this 100th Congress will commit itself to a higher standard: Pay as you go, no new deficit spending.”

[smokingfrog]

[Free Vulcan]

No, I see the same thing, just from a backward angle. I’m worried about saturating the bond market. We’ve already had some scares in the auctions. I think we’re close to the day when everyone says ‘No more please sir.’

[MontaniSemperLiberi]

You bring up a second point that I didn’t want to. I thought it might muddy the message.

Just to be clear to everyone reading this, the cost of servicing the debt is dependent on interest rates, short term or long term, depending on how the auction is set up. Our current costs of servicing the debt are low because the Fed is keeping interest rates down. If inflation starts to kick in and the Fed wants to raise them, it may decide not to because that would (almost) automatically put us in default on the debt. If investors suspect that may happen, they will demand a premium interest rate from the Treasury which would have the same effect, put us in default.

There are not a whole lot of ways to get out of this.

[MontaniSemperLiberi]

You bring up a second point that I didn’t want to. I thought it might muddy the message.

Just to be clear to everyone reading this, the cost of servicing the debt is dependent on interest rates, short term or long term, depending on how the auction is set up. Our current costs of servicing the debt are low because the Fed is keeping interest rates down. If inflation starts to kick in and the Fed wants to raise them, it may decide not to because that would (almost) automatically put us in default on the debt. If investors suspect that may happen, they will demand a premium interest rate from the Treasury which would have the same effect, put us in default.

There are not a whole lot of ways to get out of this.

[MontaniSemperLiberi]

You bring up a second point that I didn’t want to. I thought it might muddy the message.

Just to be clear to everyone reading this, the cost of servicing the debt is dependent on interest rates, short term or long term, depending on how the auction is set up. Our current costs of servicing the debt are low because the Fed is keeping interest rates down. If inflation starts to kick in and the Fed wants to raise them, it may decide not to because that would (almost) automatically put us in default on the debt. If investors suspect that may happen, they will demand a premium interest rate from the Treasury which would have the same effect, put us in default.

There are not a whole lot of ways to get out of this.

[MontaniSemperLiberi]

Three times? I’m sure I hit the button just once.

[familyop]

Bond yields go up, as investors see more risk. And as bond yields go up, interest rates elsewhere will follow. That will continue to be a closed cycle toward default, unless the offices of various government funded socio-political causes are closed, and larger programs, severely cut.

But what is more likely to occur in politics? IMO, government employee lobbies will push back, as welfare and retirement programs are cut instead—the recipe for violence and forced repudiation seen in other defaulted nations.

One other consideration: sustainable revenues come from manufacturing, and future inventions will come mostly from small manufacturing operations. Larger, older manufacturing companies tend to become inflexible and stale, preferring only inherited/ranking, degreed, licensed, authorized, stylish input/feedback sources. Thus, deregulation of new, small manufacturing businesses may be needed (zoning in rural areas, etc.).

[mo]

Massive deregulation and detaxation required to put the American job machine back on track.

Problem is...that requires beurocratic hacking and slashing in DC. They won’t do it to themselves.