Taxes

Tax Take Keeps Growing—But Good Luck Catching Up With Government Spending

The U.S. government has proven itself perfectly capable of outspending the healthiest revenue stream it has ever seen.

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The federal government took in $1,477,901,000,000 in federal tax deposits between October 1, 2014 and April 14 of this year—the fiscal year to date. That number comes courtesy of the U.S. government's Daily Treasury Statement. The good folks at CNSNews.com did the math so that I don't have to and found that this is "an all-time record for the amount of inflation-adjusted tax revenue brought into the federal Treasury from the beginning of the fiscal year through the April 15 tax-filing deadline."

Yay, team!

But here's the thing: That record tax take is still not enough to catch up with growing federal expenditures, or the soaring national debt.

That same Daily Treasury Statement revealed a total public debt outstanding of $18,152,014,000,000. That's $18 trillion give or take. Unlike tax deposits, it's not a record number. It's close enough though, since federal debt hit $18 trillion for the first time last November. Don't expect it to drop much. The Congressional Budget Office (CBO) anticipates expenditures to outstrip revenue, requiring more borrowing, into the foreseeable future. "[B]udget deficits are projected to rise steadily and, by 2039, to push federal debt held by the public up to a percentage of GDP seen only once before in U.S. history (just after World War II)," warned the CBO last summer.

Yes, the CBO makes projections, so the future isn't fixed in stone. Numbers go up and down a bit, but the number crunchers consistently predict a mismatch between money coming in and money going out.

Last month, a new report noted, "Under current law, CBO estimates the deficit will total 2.7 percent of GDP in 2015, drop to roughly 2.4 percent for the following three years, and then begin to rise. By 2025, debt held by the public is projected to reach 77 percent of GDP."

This is not a good thing. As the CBO goes on to warn in language that has become boilerplate:

Such high and rising debt would have serious negative consequences for the nation: When interest rates returned to more typical, higher levels, federal spending on interest payments would increase substantially. Moreover, because federal borrowing reduces national saving over time, the nation's capital stock would ultimately be smaller and productivity and total wages would be lower than they would be if the debt was smaller. In addition, lawmakers would have less flexibility than otherwise to use tax and spending policies to respond to unexpected challenges. Finally, a large debt increases the risk of a fiscal crisis, during which investors would lose so much confidence in the government's ability to manage its budget that the government would be unable to borrow at affordable rates.

So, record revenue is nice for the folks at the Treasury. But healthy revenue streams are only part of the equation; you also have to look at what's going out. And the United States federal government has proven itself perfectly capable of outspending the healthiest revenue stream it has ever seen.

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  1. Why bother collecting taxes at all? Just spend 100% money we don’t have, instead of some lesser percentage.

    1. That’s pretty much the classic Keynesian prescription!

  2. Finally, a large debt increases the risk of a fiscal crisis…

    Fiscal opportunity, you mean. How much of the Bill of Rights really needs to survive the next collapse?

    1. How much of the Bill of Rights hasn’t been raped to death already?

    2. Thinking just the establishment clause survives.

  3. And when we ask them how much should we give? Oh they only answer “More! More! More!”

    1. “I’m no Semator’s son daughter.

  4. Just checking:

    Looks like our total debt outstanding increased by over a trillion dollars again last fiscal year, per Debt to the Penny!

    Woot!

    Tell us again about how much the deficit has been cut!

    1. The Plug assures me that can’t be because our deficit is declining.

      1. Obama should announce his grand victory over deficits and declare us all saved by his majesty due to intentions being the same as results.

        Worked for Gary Johnson.

        /poke

  5. Calling Irish, please to email me.

  6. At least to the federal government, taxation is not so much about collecting revenue as it is about enacting congressional social policy. For example, the mortgage interest deduction, coupled with the home equity interest deduction, greatly reduces a homeowner’s tax bill. These deductions are simply a means of carrying out Congress’ stated goal of increasing the number of U.S. homeowners, all the while decreasing annual tax revenue by about $70 billion.

    I’m afraid the Internal Revenue Code (which is demonstrably not about revenue) provides too many opportunities for congressional wheeling-and-dealing to be seriously reformed.

    SLD: I don’t believe in “tax expenditures” from a philosophical perspective, since keeping more of one’s money is not the equivalent of government spending. However, it is clear that the IRC distorts markets through favorable tax treatment of certain activities, which is not libertarian.

    1. the Internal Revenue Code (which is demonstrably not about revenue) provides too many opportunities for congressional wheeling-and-dealing to be seriously reformed.

      That’s why it has to be seriously abolished.

    2. “…greatly reduces a homeowner’sborrower’s tax bill. These deductions are simply a means of carrying out Congress’ stated goal of increasing the number of U.S. homeownersborrowers…”

      Homeowners? Some, but not near as much. Thus it encourages more and larger loans, and benefits lenders more than taxpayers.

      1. No kidding. It’s a fine distinction, but my offer just got accepted on a home and since I’m paying cash outright, it does not rejuvenate my tax bill in delightful ways.

    3. And this ‘social policy’ basically amounts to a massive net transfer of wealth from renters to owners. Ironic since renters are on average poorer than owners. Someone remind again how the government helps the poor?

  7. “By 2025, debt held by the public is projected to reach 77 percent of GDP.” This is not a good thing.

    Why? Don’t we owe it to *ourselves*?

    1. Yep. Well, some of it.

      And at that level, it ain’t getting repaid. That’s not a good thing.

      1. I was beng snarky.

        Got any speculation about how the, um, end game gets precipitated?

        1. Weimar Germany

          1. I don’t think it’ll go that well.

        2. 1) a major downturn either due to natural disaster, sociopolitical instability, or some other factor.
          2) an overall credit bubble burst (housing, revolving credit, auto, student loan, etc)
          3) massive government spending to avoid “austerity” and suffering by the massive numbers of people entirely fucked when their credit limit gets revoked.
          4) massive printing of money to “pay for” the increased spending
          5) increased inflation
          6) a handful of countries going off of the dollar and onto some other currency as reserve
          7) Recession, Depression, and social unrest.

          1. (That’s in order of how I think it will go, not 7 separate options)

          2. I think that nails it.

            Many countries are creating facilities that bypass the dollar reserve and even the US-controlled international settlement system.

            China is cutting back on its exposure to Treasuries.

            The things that you would expect to see on the way to the dollar being replaced as a reserve are happening. I wouldn’t underestimate the impact that loss of reserve status would have on the US. It would put huge numbers of currently immobile dollars (those reserves) back into circulation, which would be inflationary as hell. It would also “trap” inflationary effects in the US, which we can now export to some extent due to reserve status.

            1. Spot on added commentary, RC.

              When the dollar loses its reserve status, we are royally fucked. It will be an unprecedented economic and financial catastrophe.

            2. A couple of questions:
              1) What other currency would be used to replace the dollar as a reserve? And how would it be any better than the dollar?
              2) If replacing the dollar as a reserve will collapse the US economy, doesn’t collapsing the US economy also fuck the world economy? So why do it?

              Asking seriously, because I’m not sure I see the advantages to the other players here.

              1. I’m not super knowledgeable on this, but my understanding is that China is trying to put lipstick on the pig that is the yuan in hopes of getting a few takers. I’m not sure who the other potential reserve currencies are, but I know that some countries are trying to clean up their currency like China in hopes of making a quick and easy transition from dollar to whatever.

                Yes, the world economy would be fucked, but its a question of magnitude. If you let go of the tow rope before the boat goes over the rapids, the rocks hurt less. Also, superficial concerns like hating America, nationalism, and prestige play into these decisions.

              2. (1) There’s already discussion of a basket of currencies and commodities to serve as a kind of “virtual reserve” benchmark.

                (2) I think the various dollar workarounds are being done mainly as contingencies. But contingencies have a way of becoming self-fulfilling prophecies.

                I think what will probably happen is that we will so debase the dollar that the knock-on exporting of our inflation will become intolerable, and people will try to minimize it using their workarounds until we accidentally hit a tipping point nobody meant to trigger.

          3. #1: See: End of Bush administration
            #2: Housing bust, see #1.
            #3: TARP, Recovery Act. Lots of spending.
            #4: Skyrocketing fed balance sheet, zero interest for 6.5 years.
            #5: Inflation hawks warn about inflation coming. Inflation drops. Hawks warn again. Inflation drops.
            #6: Dollar is stronger than ever.
            #7: Unemployment is trending down, stock markets set record highs.

        3. Black swan event precipitates an overload on the system.

    2. That reminds me of another point of irony regarding Keynesians. All that money we ‘owe to ourselves’ is being used to, basically, break windows and fix them again, or dig ditches to be refilled; I’d sat constitutes an egregious case of ‘idle resources,’ which I’ve been told is the arch nemesis of the Keynesian.

      Also, I suspect the average bondholder (and therefore bond interest earner) is wealthier than the average American, so isn’t deficit spending (pr more specifically, servicing of the debt) just a transfer of wealth from the general taxpaying population to wealthier than average bond investors?

      But about those 1%ers…

  8. What a bunch of naysayers. Krugabe tells me the government is really, really good at providing necessary services like open ended defined benefit retirement benefits. So stop whining, and pay your taxes. They’ll print borrow the difference, so be glad you’re not paying the full freight.

  9. That is some damn fine alt+txt, 2Chilies!

  10. Taxes are free money for politicians. They don’t have to earn the money but get to use it as they please. There is never enough free money. Free money is the most addictive thing on earth. You could tax at a hundred percent of GNP and we still would be running a deficit.

    1. “Eventually, you run out of other people’s money.”
      – Margaret Thatcher

    2. Taxes are the cost of civilization…or some other nonsense bromide.

  11. How much of the “public” holding is by the Federal Reserve now? I’m sure when the time comes they’ll also buy the Social Security Trust fund’s treasuries.

  12. My favorite thing about h&r’s recurring cold sore that flames up every couple weeks: the unforgettable assertions, like suggesting that retirees spending their SS pensions abroad are “living high on the hog,” because they’re invigorating foreign economies with our hard-earned dollars. DEY TOOK ER STIMULUS.

    I didn’t think po’ hick dumbfuck economic populism could mesh so well with academic Keynesianism, and I regret my lack of faith.

    1. To be fair, Tulpa is really, really stupid tho.

    2. In practice, what exactly is the difference between academic Keynesianism and dumbfuck economic populism? Even Krugman has started to turn in favor of raising minimum wage; wouldn’t be surprised at all if he starts complaining about outsourcing jobs sooner or later.

  13. Fuck you, cut spending.

  14. Line by Line spending reductions, Peanuts!

    Line by Line!

    /derp

  15. Whenever one of my liberal friends rails against the “cuts” the Repubs are pushing, I point out this kind of data, and ask, “Why do you hate the children?”

    1. They rail against the cuts, them praise Obama for the recovery that followed the cuts; they rail against the energy industry and talk up the importance of the environment, then praise Obama for the recovery that followed the energy boom.

      Consistency is racist.

  16. The “math” from cnsnews.com is just about as competent as I expected.
    They find the shocking, shocking result that, with a growing population, and a growing economy, tax receipts are hitting new highs. Are they suggesting that we should return to the Bush era of a crashing economy and dropping tax receipts?
    Look closely at their graph, which starts in 1985.
    1985-1989: Booming receipts! Reagan bad!!
    1990-1993: Flat receipts. Bush good! Read my lips!
    2009-2011: Dropping federal receipts. All branches controlled by Democrats, good!
    2012-current: Booming tax receipts. What has the Tea Party led congress done???

    This really confuses cause and effect.

  17. First, the flat and always negative spending-versus-revenue graph should make it infinitely clear to all y’all that that is EXACTLY what would remain the same and/or get worse if a Balanced Budget Amendment is enacted…

    Taxes would rise to follow expenditures.

    That’s not rocket surgery if you think about it a few nanoseconds.

    Second, the ONLY fundamental reason/justification for ANY tax is that the Transaction Must Be Measurable. Period. … my 33rd Law… http://www.plusaf.com/falklaws.htm#33rd Period.

    Wanna argue those?
    🙂

  18. Or …… Why do multi millionaires go broke? How do they lose everything when they make so much money? I guess they emulate the greatest economy the world has ever known. How pathetic.

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