U.S. Posts Record December Surplus on Fannie Mae Payments

[Purveyor]

Source: Bloomberg

By Kasia Klimasinska - Jan 13, 2014

The U.S. posted a record December budget surplus as higher payroll taxes, payments from Fannie Mae and Freddie Mac, and a declining unemployment rate helped improve the government’s finances.

Revenue exceeded spending by $53.2 billion last month, compared with a $1.19 billion deficit in December 2012, the Treasury Department said today in Washington. The median estimate in a Bloomberg survey of 29 economists was for a $44 billion surplus, the same as the Congressional Budget Office’s prediction.

The 1.2 percentage-points drop in the nation’s jobless rate to 6.7 percent in 2013 was the steepest calendar-year decline since 1983. The strengthening economy and swelling tax revenue cut the country’s deficit as a share of gross domestic product by more than half to $680.3 billion in the fiscal year ended Sept. 30 from a record $1.42 trillion in 2009.

“We continue to see economic conditions improve, which is being reflected in the budget deficits continuing to narrow,” said Michael Brown, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina.

Read more: http://www.bloomberg.com/news/2014-01-13/u-s-posts-record-december-budget-surplus-on-fannie-mae-payments.html

[MannyGoldstein]

1. The austerity... It is working!

As long as the unemployed keep doing their part by becoming so despondent that they give up looking for work, we'll be sitting pretty.

Regards,

TWM

[Igel]

3. That's not what they meant.

The assumption is that the unemployment work is directly related to the "employment" rate. If there's a drop in unemployment, there must be a rise in employment.

Whlle that's not necessarily the case (just look at the dismal stats from 12/13), as more people find work tax revenues increase. Given the complaint that a disproportionate share of the jobs that have arisen in the last year are low-income jobs, that increase in income taxes is less than it would normally be. But many of the jobs weren't low income, so revenue did increase.

Most of the decline in unemployment benefits would have been state/local budget savings. The real savings to the federal budget will be seen if they don't pass federal extended unemployment benefits.

Those who have given up looking for work don't decrease the budget deficit; if anything, they may increase it by requiring increased entitlement spending.


December had increased revenues for a few reasons.
--Increased revenues as people return to work.
--Increased revenues as people paid quarterly tax on realized capital gains
--Increased revenues from Freddie and Fannie (that's a biggie, to be honest: the government as mortgage insurer)
--Increased taxes from the "taxes on the rich" that were allowed to expire a year ago, even though a lot of people seem to insist that they haven't expired (capital gains is still a bit lower, but it also increased)

But a large share of the credit also has to go to the sequester and the elephant the sequester is riding on. It's the Clinton strategy, one that Clinton boasted of even as Obama whines about it, claiming the credit without giving a good reason because it's a better cudgel than it is laurels. The sequester requires a spending reduction. However, the net result of requiring a reduction, even a trivial one like the sequester, is to avoid spending increases. This lets inflation, population growth, and economic expansion catch up to the size of government spending. A result of the obstructionist Congress is that one-off spending bills don't get passed, also holding down spending.

[MannyGoldstein]

4. Good analysis, thanks

My point on the unemployment was really that the federal government is getting unwarranted credit for the lower "unemployment" number that's commonly used, which is actually a bad indicator of unemployment. The number of new jobs last month was not enough to keep up with demographic changes, yet the "unemployment" number dropped because so many long-term unemployed workers gave up on trying to find a job.

[cosmicone]

2. Look! There is a surplus ... Time to give tax cuts