Accelerating Towards the Abyss: The Real Story of Fiscal Year 2010
The Obama administration and the Pelosi-Reid Congress have spent wildly and run up deficits recklessly on a scale virtually unprecedented in human history.
October 25, 2010 - 12:00 am
After cutting through the “clever” misdirections contained in the final Monthly Treasury Statement of the federal government’s fiscal year just ended on September 30, it’s clear that that Uncle Sam’s true financial situation deteriorated at an even faster rate in fiscal 2010 than it did during fiscal 2009. What I choose to describe as Uncle Sam’s operating deficit was 19% higher. You read that right.
Let’s start with receipts.
In fiscal 2008, before deducting IRS-generated stimulus payments that were substantively disbursements, the government took in over $2.6 trillion. In recession-dominated fiscal 2009, collections dropped about 20% to $2.104 trillion. In fiscal 2010, the supposed year of economic recovery, receipts were $2.162 trillion, a less than 3% increase that was over $100 billion short of the $2.264 trillion the Congressional Budget Office (CBO) projected in August 2009.
When you look at why any increase in receipts occurred at all, you realize how weak and two-tiered the economy really is. Only two major areas showed an increase: income taxes paid directly by corporations (up by 38% to $191 billion) and collections from the Federal Reserve (up by over 120%, from $34 billion to $76 billion, per the CBO). Large, established firms pay the vast majority of corporate income taxes; the increase in these collections demonstrates that, relatively speaking, their situation has improved. Collections from the Fed have spiked because its “money from nothing” quantitative easing (QE) portfolio has ballooned; interested and dividends earned on QE investments are handed over to the Treasury. After excluding QE earnings, the government’s operational receipts in fiscal 2010 amounted to $2.086 trillion, barely higher than fiscal 2009′s comparable $2.070 trillion.
Fiscal 2010 receipts trailed fiscal 2009 in the two other major categories. Collections of individual income taxes (down 2% to $898 billion) and for Social Security and Medicare (down almost 4% to $815 billion) were very disappointing. The Social Security system is running monthly cash deficits — right now, not 30 years from now.
The real receipts downer is buried within the individual income tax category. Look at what has happened during the past four years with gross non-withheld income tax receipts, which are predominantly paid by entrepreneurs, business owners, and investors (in billions):
- Fiscal 2007 — $437.6
- Fiscal 2008 — $455.3
- Fiscal 2009 — $312.4
- Fiscal 2010 — $278.2
From their peak in 2008, gross non-withheld receipts have dived by almost 39%. During fiscal 2010, the year of supposed economic recovery, they dropped 11%.