US Government Spent More than Eight Times its Monthly Revenue

According to new data from the Treasury Department, the federal government grossed $194 billion in March, paid out nearly $66 billion in refunds, netting $128 billion in tax revenue. However, the Treasure paid out a total of $1.1187 trillion in federal expenses.

From CNS News.com:

That $1.0528 trillion in spending for March equaled 8.2 times the $128.179 in net federal tax revenue for the month.

The lion’s share of this federal spending went to redeem Treasury securities that had matured during the month—most of which were short-term Treasury bills that have terms of one-year or less.

In fact, during March the Treasury redeemed $705.3 billion in Treasury securities of which $623.9 billion were short-term bills with a term of one year or less.

After the disbursements made to pay off the $705.3 billion in loans that came due in March, three of the other top four federal spending items for the month were entitlements programs. The other top item was payments to defense contractors.

The Treasury paid $49.8 billion in Social Security benefits in March, $47.4 billion in Medicare benefits, and $22.575 billion in Medicaid benefits. It also paid $37.9 billion to defense contractors.

To help pay off its $1.0528 trillion in monthly bills on only $128.179 in monthly tax revenue, the Treasury turned primarily to new borrowing. During the month, according to the Treasury statement, the government sold $786.5 billion in new securities. It also drew down its cash balance from $190.6 billion at the beginning of the month to $118.1 billion at the end of the month. It also reaped $18 billion from the sale of assets in the Troubled Asset Relief Program.

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Debt Ceiling: Danger ahead

With the passage of yet another temporary spending measure last week, lawmakers are increasing the likelihood of a federal financial meltdown. Just what we needed.

CNN reports:

The latest funding bill will expire April 8. Between now and then Democrats and Republicans will have to find some compromise on funding levels for the rest of this fiscal year or risk a government shutdown.

The Treasury Department, meanwhile, now estimates that the debt ceiling could be hit between April 15 and May 31. If it's not raised, Treasury will not be allowed to borrow and therefore will not be able to pay the country's bills in full without taking drastic measures to cut spending or raise taxes.

Not insignificantly Congress will be out of session next week and the last two weeks in April.

In the past, Congress has always ended up raising the cap, if sometimes at the last minute. And some policy experts think they will do so again, but there's no guarantee precedent will hold.

How did we get to this ridiculous crossroads? Simple. Lawmakers failed to do their jobs.

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Federal, State and Local Debt Hits Post-WWII Levels

From WashingtonPost.com:

The daunting tower of national, state and local debt in the United States will reach a level this year unmatched just after World War II and already exceeds the size of the entire economy, according to government estimates.

But any similarity between 1946 and now ends there. The U.S. debt levels tumbled in the years after World War II, but today they are still climbing and even deep cuts in spending won't completely change that for several years.

As President Obama and Republicans squabble over whose programs to cut and which taxes to raise, slow growth and a rising tide of interest payments - largely beyond their control - are making the job of fixing the budget much harder than in the past. Statehouses and governors face similar challenges.

After World War II, the federal debt - including debt purchased by the Social Security Trust Fund - hit nearly 122 percent of gross domestic product. State and municipal debt back then was minimal. By the time Dwight Eisenhower was elected president six years later, the federal government's debt had dipped to about three-fourths of GDP.

The key factor in the rapid drop in government debt, said Harvard University economist Kenneth Rogoff, was fast economic growth. Spurred by a young labor force, world-leading manufacturers, high personal savings rates, a pent-up demand for consumer goods after years of war and the Depression, and a bout of inflation, the economy grew 57 percent in six years. Thanks to sharp postwar cuts in defense outlays, federal government spending also tumbled for a couple of years.

Continued at WashingtonPost.com...

Moody's May Cut US Rating on Tax Package

Yesterday Moody's sent out a warning that the proposed tax compromise could cost up to $900 billion, and that the resulting increase in federal debt could hurt the US government’s credit rating. Not exactly good news for the US.

CNBC reports:

The plan agreed to by President Obama and Republican leaders last week could push up debt levels, increasing the likelihood of a negative outlook on the United States rating in the coming two years, the ratings agency said.

A negative outlook, if adopted, would make a rating cut more likely over the following 12-to-18 months.

For the United States, a loss of the top Aaa rating, reduce the appeal of U.S. Treasuries, which currently rank as among the world's safest investments.

"From a credit perspective, the negative effects on government finance are likely to outweigh the positive effects of higher economic growth," Moody's analyst Steven Hess said in a report sent late on Sunday.

After Obama announced his plan, Treasury prices fell sharply in volatile trade last week and yields have hit a six-month high, in part due to concerns over the effect the package will have on government debt levels.

If the bill becomes law, it will "adversely affect the federal government budget deficit and debt level," Moody's said.

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Obama Tells Panel on Federal Debt to Consider All Options

From NY Times.com:

As President Obama’s bipartisan commission on reducing the mounting federal debt headed to its first meeting on Tuesday, the president told its members that “everything has to be on the table” as they consider options for reducing spending and increasing tax revenue.

Mr. Obama, appearing in the Rose Garden at the White House, recounted some steps his administration has already taken to restrain the growth of annual deficits. But he said, “This alone will not make up for the years in which those in Washington refused to make hard choices and live within their means.”

“And it will not make up for the failure to level with the American people about the costs of the services that they value,” he added. “This is going to require people of both parties to come together and take a hard look at the growing gap between what the government spends and what the government raises in revenue. And it will require that we put politics aside, and that we think more about the next generation than the next election.”

The president was flanked by his choices to chair the commission: Alan K. Simpson, the former Republican senator from Wyoming, and Erskine Bowles, a Democrat and former White House chief of staff. With a grin, Mr. Obama saluted them for their courage in accepting the assignment — a nod to the low expectations that many in Washington have for the commission, given the polarization between the parties, especially in an election year.

Mr. Obama then left for Iowa for the next stop on his “Main Street Tour,” and the commission members walked across the street to an executive conference center for their three-hour inaugural meeting.

Obama Signs U.S. Debt Limit Increase Into Law

After recently passing the Senate, Obama has signed a bill into law that raises the Federal debt from 12.1 trillion to 12.4 trillion. There are many critics to this bill that was passed along partisan lines. However, the Obama administration has stated that they have no other choice. Reuters.com posted a story on how the debt limit has doubled over the past decade.

Congress approved an increase in the debt limit from $12.1 trillion on Thursday, winning two more months of funding for a record U.S. deficit as Obama tries to stimulate economic growth after the country's worst recession in 70 years.

Critics say Democrat Obama is making the deficit worse, but the White House blames the recession and unfunded cuts in taxes and prescription drug aid, which were all inherited from his Republican predecessor George W. Bush.

The U.S. government posted a record $1.4 trillion deficit in the fiscal year ended September 30 and is on track during the current fiscal year to spend at least $1 trillion more than it collects.

The debt has more than doubled since 2001, thanks to wars in Iraq and Afghanistan, tax cuts and the recession, which has caused tax revenues to plunge and safety-net spending to rise.

Geithner Asks Congress to Increase Federal Debt Limit

From the Wall Street Journal:

U.S. Treasury Secretary Timothy Geithner asked Congress to increase the $12.1 trillion debt limit on Friday, saying it is "critically important" that they act in the next two months.

Mr. Geithner, in a letter to U.S. lawmakers, said that the Treasury projects that the current debt limit could be reached as early mid-October. Increasing the limit is important to instilling confidence in global investors, Mr. Geithner said.

The Treasury didn't request a specific increase in the letter.

"It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations," Mr. Geithner said in a letter to lawmakers.

Mr. Geithner said that it is "clearly a moment in our history" that requires support from both Democrats and Republicans for the increase.

"Congress has never failed to raise the debt limit when necessary," Mr. Geithner said.

The non-partisan Congressional Budget Office said Thursday the federal government's budget deficit reached $1.3 trillion through the first ten months of fiscal 2009, on track to reach a record high of $1.8 trillion for the 12-month period.