Here’s a headline you won’t see in the media this week: we incurred the largest monthly deficit on record in February.
Seven months into a government “reined in” by the Budget Control Act, we are supposed to be reaping the benefits of budget reduction. Yet, according to CBO, we incurred a gargantuan
$229 billion $232 billion deficit in the month of February. The conservative Washington Times was the only publication to note that this was the largest monthly deficit on record. Keep in mind that we didn’t start accruing annual deficits of $230 billion until this past decade. The preliminary estimates from CBO projected outlays at $335 billion and revenues at $103 billion. Our total deficit for the first 5 months of fiscal year 2012 is $631 billion ($869 billion in revenue; $1.5 trillion in outlays).
Think for a moment about what it means to spend $335 billion in 29 days. It comes out to $11.5 billion per day; $480 million per hour. So the next time Congress deliberates over a few billion in spending cuts over the course of a month, remember that we will add several hundred billion more in debt during the course of the debate.
What is so astounding about the record monthly deficit is that it comes amidst a recovery in the job market and an overall increase in revenues. Due to quirks in the scheduling of government payments, February is always a bad month; nevertheless, even during the worst months of the recession, we never suffered such a large budget deficit. In February 2009, the monthly deficit checked in at $193.8 trillion. At a time when tax receipts are increasing again (corporate tax receipts are up 56%), we should not be racking up such high deficits. Hence, it is incontrovertibly clear that we don’t have a revenue problem; we have a spending problem, most prominently, an entitlement and welfare problem.
While some figures show spending for the year down a few points, that reduction is entirely due to an accounting shift. Most federal entitlement payments are sent out on the first of the month; however, this year, October 1 (which was also the first day of the fiscal year) fell out on a Saturday. As such, $31 billion of October’s payments (accounting for 55% of this year’s “deficit reduction” and 92% of outlay reduction) went out on the last day of September, thereby saving the new fiscal year from the extra accounting burden. So ultimately, we have not cut a dime in spending (even before the record deficit set in February). As CBO notes, spending has actually gone up in some areas:
“In contrast, net payments to the government-sponsored enterprises Fannie Mae and Freddie Mac increased by $11 billion, as compared with those in the first five months of fiscal year 2011. Adjusted for timing shifts, outlays for Social Security benefits and Medicare also were higher, by $14 billion (or 5 percent) and $6 billion (or 3 percent), respectively.”
Over the next few months, we’re going to witness sharp debates over the FY 2013 budget resolution, the sequester, and the level of discretionary spending. While it is certainly important to reduce as much discretionary spending as possible, it is clear that any budget deal that ignores mandatory spending will do nothing to stop the record deficits.