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Government Numbers: How Much is Actually Being Spent?

Posted
7/19/2013 10:05:00 PM
By: Steven Hansen
Referenced Stocks:

Cyberspace is full of data. Some of the data can be correlated across various sources with different interests, some of the data comes from one source but can be correlated within the data itself, and some of the data is on USA government income and spending. This data currently is not adding up.

One can always find reasons for short term deviations in accounting data.  But USA Treasury data has periodic deviations built in.  Take something simple like government revenue (which includes social security contributions) and expenditures.

Figure 1: Federal Government Receipts (red line) vs Expenditures (blue line)

Just a note that the above graph is current through 1Q2013 - but the FRED computer generates quarterly data plots looking like the data was current only through 4Q2012. While at it, I am also disappointed with FRED plots because they do not allow creation of moving averages which would allow a better visualization of trends on noisy data series.

Having said this, the massive amount of data available in one place - and the ability to compare and automate this data using a variety of tools based into the FRED software - makes FRED one of the most important economic data resources on the internet.

But FRED does not create data, it reports data given to it by various government and private organizations.  When you deal with spending data from Treasury, you might as well give up as the data never seems to add up. Take figure 1 above.  If you subtract revenue from expenditures - logically this is debt which needs funding. Even in the private sector, the way accounting methods work, it would not add up exactly.  But this is not a little difference - but a big difference.

Figure 2 - Difference between Government Expenditure and Receipts (blue line) and Growth of Federal Government Debt (red line)

Hopefully a reader of this post can advise why figure 2 does not add up in the years since the Great Recession.  It almost looks the the difference is the balance sheet of the Federal Reserve. I only point this out in passing because I am not an expert in treasury operations - and am really looking for an answer.

There have been several posts based on the monthly treasury statements which say that the government has run a surplus in three months recently. Can this be true? It is if you subscribe to the Bernie Madoff school of accounting. Consider that the government is at its debt ceiling and is undertaking special operations:

When the US hits the debt limit, the Treasury Department resorts to "extraordinary measures" to fund expenditures. Usually these measures consist of suspending investments in the "G-fund" of the individual retirement funds of federal employees, the Thrift Savings Plan. In 2011 these measures were extended to suspending investments in the Civil Service Retirement and Disability Fund (CSRDF), the Postal Service Retiree Health Benefits Fund (Postal Benefits Fund), and the Exchange Stabilization Fund (ESF). In addition to suspending investments, certain CSRDF investments were also redeemed early. In 1985, the Treasury has also exchanged Treasury securities for non-Treasury securities held by the Federal Financing Bank.

It also delays payments of current monies due. Can you find a summary of USA government monies payable but not paid? Government sector accounting resembles nothing like what is imposed on the private sector.

Do you think anyone in Congress understands the true state of government treasury operations? Are there special reports (and marked "top secret") so the true status never reaches the general population? Is even debate on raising the debt ceiling a joke as treasury operations seem clouded by smoke and mirrors?

In a period of time when all governments are printing money, it does not seem logical that government debt is that important. However government transparency is important if the government is to be accountable for their actions.

Other Economic News this Week:

The Econintersect economic forecast for June 2012 again declined marginally, and remains under a zone which would indicate the economy is about to grow normally. The concern is that consumers are spending a historically high amount of their income.

The ECRI WLI growth index value has been weakly in positive territory for over four months - but in a noticeable improvement trend. The index is indicating the economy six month from today will be slightly better than it is today.

Current ECRI WLI Growth Index

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Initial unemployment claims improved from 360,000 (reported last week) to 334,000 this week. Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate.

The real gauge – the 4 week moving average – improved from 351,750 (reported last week) to 346,000. Because of the noise (week-to-week movements from abnormal events AND the backward revisions to previous weeks releases), the 4-week average remains the reliable gauge.

Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line)

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Bankruptcies this Week: AgFeed Industries, Excel Maritime, City of Detroit, IntraOp Medical

Data released this week which contained economically intuitive components (forward looking) were:

All other data released this week either does not have enough historical correlation to the economy to be considered intuitive, or is simply a coincident indicator to the economy.

Click here to view the below scorecard with active hyperlinks.

Weekly Scorecard