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%.
This would not be happening in a truly improving economy. What the figures tragically show is that the “Going Galt” phenomenon, which got going in mid-2008 as what I have been calling the POR (Pelosi-Obama-Reid) economy began, is continuing and spreading. Those of us who have been asserting that “it’s the uncertainty, stupid” have not been crying wolf. Non-witheld receipts won’t recover significantly unless and until something is done about that uncertainty.
Many of us have also been saying, “It’s the spending, stupid.” That situation also worsened in fiscal 2010.
As the following graphic shows, taking away lower payouts to wards of the state Fannie Mae and Freddie Mac and the effects of the Troubled Asset Relief Program (TARP), out-of-pocket federal spending in fiscal 2010 shot upward (figures presented are from the CBO’s pre-release report, and only differ by very minor amounts from the final Treasury Statement):
Spending on the regular operations of the government in fiscal 2010 was 7.5% higher than the previous year. Even if you buy Team Obama’s claim (which I don’t) that fiscal 2009 spending had to increase radically to combat the recession, what justification is there for the 2010 spike, when inflation was barely 1%?
Let’s look at just a few of the increases in departments having little or nothing to do with economic recovery (detail assembled from the Treasury Statement is here):
- Commerce — increased by 23%, from $10.7 billion to $13.2 billion (pretty sad, given how little increase in real commerce there has been)
- Education — up 74%, from $53.4 billion to $92.9 billion (if you don’t think that kids have become 74% better-educated, you’re not alone)
- Energy — up 30%, from $23.7 billion to $30.8 billion (I guess attempting to stop energy development and exploration at every turn requires a lot of money)
- EPA — up 36%, from $8.1 billion to $11.0 billion (this might be a grim “bargain,” given that the agency’s regulatory burden seems to have increased by a much higher percentage)
- International Assistance — up 35%, from $14.8 billion to $20.0 billion (somehow, those who were supposed to like us more once Barack Obama was elected don’t seem to appreciate our expanded largesse)
- Small Business Administration — up 177%, from $2.2 billion to $6.1 billion (quite ironic, given how small business has suffered since the POR economy began)
One of the few decreases that occurred took place in an area that involves a key constitutionally designated duty of the government. It was in Homeland Security, where spending declined 14%, from $51.7 billion to $44.5 billion.
All told, Uncle Sam’s fiscal 2010 operational deficit was really $1.435 trillion, a breathtaking 19% increase from fiscal 2009:
And yet, we’re still not done. The $1.435 trillion is just the “on-budget” deficit. During fiscal 2010, the national debt went up by $1.652 trillion (from $11.910 to $13.562 trillion), meaning that “off-budget” activities generated over $200 billion in additional deficits. The national debt has increased by over $3 trillion since Obama’s January 20, 2009, inauguration.
Now that this column has completed its fog-clearing operations, the truth becomes undeniable: The Obama administration and the Pelosi-Reid Congress have spent wildly and run up deficits recklessly on a scale virtually unprecedented in human history. They have no interest in stopping — unless they themselves are stopped, at the ballot box and during the years that follow