The Shocking Reason Why The US Just Spent A Record $429 Billion In One Month
On Thursday morning the CBO released a surprisingly upbeat assessment of Donald Trump's proposed budget, calculating that it would cut the cumulative US deficit by 30% over the next decade, preventing the US debt from spiraling out of control (even further).
That. however. may be an overly optimistic assessment, especially following the release of the latest monthly budget data, which showed that not only did the US deficit surge to $90 billion, far above the $38 billion consensus estimate, and a "NM" compared to the $6.3 billion budget surplus in June of last year, but the US also saw the biggest one month outlay on record, at $429 billion, 33% higher than the $323 billion in outlays one years ago.
What prompted this massive surge in outlays?
The biggest reason for the outlier print is that according to Stone McCarthy, outlays increased by at least $54 billion relative to baseline because the Treasury revised up its estimates of the subsidy cost of housing and student loans it guarantees.
The cost of those loans is treated in the budget on a present value basis, not a cash basis. Treasury periodically revises these costs. (It should be noted that the associated increase in outlays doesn't impact Treasury borrowing or debt under the debt limit.) If not for these special factors, Treasury would have reported another small surplus for June... however it did not.
On the revenue side, things were just as bad with the US Treasury collecting only $338.7BN, just 9% higher than the $330BN in June of 2016.
What makes the surge in the deficit especially surprising is that June is often a surplus month, as the Treasury receives large corporate and non-withheld individual tax payments in that month.
One theory explaining the shortfall in revenues reflects taxpayers delaying the recognition of income in 2016, anticipating tax cuts this year. That revenue should eventually be recovered. About a third of the revision was on the outlay size, with a large chunk due to changes in the estimated subsidy costs described above. Based on the CBO revisions, we think the deficit for the fiscal year, which has three months left, will be in the $650 billion to $700 billion range.