How Do You Plan To Pay For This?


How Do You Plan To Pay For This?

Posted by Karl Denninger

The numbers are now in on the first fiscal quarter for 2010, and it’s ugly.

The December figures bring to $388.5 billion the deficit for the first three months of Washington’s 2010 fiscal year.

That’s on top of a staggering $1.4 trillion budget shortfall for fiscal 2009, more than three times the size of the deficit that the government ran in 2008.

Yeah, let’s see.  That would be $1.554 trillion for this fiscal year (assuming an equal run rate) – and all President Obama too, since the entirety came after he took office.  No blaming Bush for this one folks.

Receipts were $219 billion in December, the Treasury reported, while outlays were $311 billion.

A year ago in December, receipts were $238 billion. Outlays were $289.5 billion.

So despite the claims that the economy is improving, receipts are down from last December.  Remember, last December was a disastrous Christmas and widely reported as “rock bottom” in terms of both consumer confidence and employment.

But in point of fact this December not only was the government blowing more money but they were taking in less.

Yes, tax receipts are progressive, which means that smaller personal income drops result in larger tax drops (due to bracket regression) but the fact remains – if there is some sort of real economic recovery happening it certainly isn’t being reflected in the payment of taxes!

How much room is left on that Federal Credit Card Timmy?  Mr. President?

This much we do know – there’s an awful lot of interest in very short-term Treasury bonds – in the longer end, not so much. 

And when it comes to foreign government and investor buying?

“What is a goose egg?”
“No Mas!”

Yeah, I know, the market thinks that Bernanke will “extend” the money-printing (“quantitative easing”) forevermore as a means of preventing the market from assessing a proper risk premium on what has become one of the largest subprime borrowers of all.

If you’re betting on that as an investment thesis and your belief in continued equity market advances relies on the below-market rates that The Fed pumping some $1.7 trillion in printed money into the economy has enabled thus far, you better be right.