US Revenues Below Budget

24/7 Wall Street Comments on Budget Revenues {excerpt}.

Budget: The Revenue That Was Never There
Posted: June 11, 2009 at 5:00 am on their web site. Link to follow:


The Treasury said that the federal budget deficit in May was almost $190 billion bringing the total {deficit} for the government’s fiscal year to $992 billion......The first reaction to the news was that the government’s red ink for the year will exceed the forecast of $1.84 trillion. The smart money focused on the revenue shortfall. Tax receipts through May were less than $1.67 trillion, 18% lower than they were for the same period a year ago. Even relatively naive observers of the federal government’s financial difficulties understand the Congress and the Administration may be able to hold expenses to the level planned. Income is another matter. With corporate profits dropping and in many cases turning into losses, tax revenue from businesses will continue to drop. Unemployment and the drop in the average number of hours worked by Americans each month will insure that the tax income from individuals will keep dropping as well.
The fear among financiers and intelligent government servants is that the deficit has already reached a point of no return. Spending is set on a course that the Administration and Congress refuse to reverse. Receipts are not only dropping, they are dropping quickly and are not likely to recover for the next year. GDP growth may look good on paper, but employment is what pays the government’s rent.
Interest rates have already told the Treasury that the world knows it is borrowing too much money. It is odd that there is so little fear in the air in Washington. Congress may go home for the summer recess and return to the Capitol to find that a fiscal emergency has arisen that will require it to find a large number of cost cuts to keep China buying Treasuries.....The US government may find that the rate it has to pay to borrow capital has become so high that it has to turn to its citizens for the equivalent of a bailout.......
.....The government may inadvertently be killing the American dream of prosperity by burying its citizens under a mound of taxes just as they have reached the point when they know a growing number of neighbors and family members who are out of work. .......

Douglas A. McIntyre

Link: http://247wallst.com/2009/06/11/budget-the-revenue-that-was-never-there/#more-37386

Comment: I think this is a bit too alarmist of an article but I wanted to get it out there because the deficit is a concern. Deficits are currently way to high. Everybody knows that. For the sake of fiscal responsibility it's more important what percentage the total deficit remains relative to GDP longer term. As long as this new level of borrowing is not a permanent fixture every year I think we will be OK. One thing the US has going for it is that our population is still growing via births and immigration. As long as this remains the case we have a very good shot of ultimately growing our way out of these deficits versus inflating our way out of them. It's one of the main reasons that we will continue to encourage immigration.