Fiscal 2018 Deficit through March

The chart below compares the monthly deficit of Fiscal 2018 with Fiscal 2017. Through the first six months of the fiscal year, the federal government has overspent by $598 billion, which is $73 billion more than the prior year. As a percentage, the deficit is nearly 14% greater than one year ago.

The rate of growth in federal revenues has slowed since the beginning of January. Since most of the tax law changes became effective on January 1, this is not a complete shock, especially since the CBO projected the federal government would collect $1 trillion less over the next decade. Add in the additional spending approved through the Fiscal 2018 Omnibus appropriations bill, and the deficit will continue to increase throughout the rest of the fiscal year.

What do you think of the current increase of the federal deficit?

U.S. Budget Deficit through November

Below is a graph tracking the monthly federal deficit for Fiscal 2018, which runs from October 2017 through September 2018.

The federal government overspent by $198 billion in October and November. This compares to the $181 billion deficit through November 2017. Revenues and expenditures both grew at 6% over last year. Since annual expenditures exceed revenues by $600 billion, the cumulative deficit is greater than last year.

Congress has yet to pass the required appropriations for Fiscal 2018, and current spending is determined by temporary funding measures. The current shot-term Continuing Resolution ends January 19, 2018.

Do you think the spending measures approved by Congress will increase or decrease the budget deficit for this year?

The Deficit for Fiscal 2017

The Congressional Budget Office (CBO) has finished accounting for the country's finances for Fiscal Year 2017, which ended September 30, 2017. The deficit for the year was $666 billion, and the chart below shows the budget surplus or deficit by month. 

The following are a few highlights.
▪️The deficit was $80 billion more than Fiscal 2016.
▪️Since the CBO initially projected the deficit would be less than 2016, the federal government spent over $100 billion more than initially planned.
▪️Revenues were $3.3 trillion: 1% more than Fiscal 2016.
▪️Expenditures were $4.0 trillion: 3% more than Fiscal 2016.

What do you think about the country's financial results for the past year?

The Fiscal 2017 Deficit through August

Below is a graph tracking the monthly deficit or surplus for the U.S. Government. The year-to-date deficit is $621 billion, and the Congressional Budget Office is projecting a $693 billion deficit for Fiscal 2017, which ends on September 30.The Fiscal 2017 deficit is expected to be $100 billion greater than the Fiscal 2016 deficit.

From the graph, there is a clear pattern of overspending by the federal government. So far, there are only two months during the year that recorded a surplus, which easily explains why the federal government will post a deficit of nearly $700 billion this year. Since many corporate and individual income tax payments are due today, it's possible that September will also record a surplus, which would bring the total surplus months to three. However, the occasional surplus isn't sufficient to cover the deficits that occur in most months.

What do you think about the federal government spending more than it receives for nine months of the year?

The U.S. Deficit for Fiscal 2017 Through July

The graph below tracks the deficit of the U.S. government for this fiscal year, which ends September 30, in comparison to the monthly deficit for Fiscal 2016. For the first 10 months of the year, the cumulative deficit is $568 billion; $54 billion more than last fiscal year. 

Since July 1, 2017 fell on a Saturday, the federal government made a number of payments in June, that would traditionally be recorded in July. As a result of this timing difference, the June 2017 deficit was much larger, and the July 2017 deficit was less. When combined, the June and July 2017 monthly deficits are $30 billion more than the same two months of 2016.

The deficit for all of Fiscal 2016 was $587 billion. Since the federal government has already overspent by $568 billion for the first 10 months of this fiscal year, it's all but certain the Fiscal 2017 deficit will be higher than Fiscal 2016. This is significant because the deficit was initially projected to decline in Fiscal 2017 and Fiscal 2018, before starting a rapid increase in Fiscal 2019. Since the current year deficit will be higher than last year, the cycle of ever increasing deficits may have already started and will continue indefinitely unless Congress does something to move towards a balanced budget.

What's your reaction to the latest budget deficit numbers?

The Fiscal 2017 Deficit Through June

The chart below tracks the monthly surplus or deficit recorded by the U.S. government for Fiscal 2017, which ends on September 30, 2017.

The deficit for June 2017 was $93 billion higher than June 2016. Since July 1st fell on Saturday, certain payments that would typically have occurred in July were paid in June. This accounted for $44 billion of additional June spending. Excluding the timing difference, the June deficit was $49 billion more than June 2017.

Overall, revenues for the first nine months of Fiscal 2017 were 2% more than Fiscal 2016, but total spending increased by 6%. This mismatch of spending growth in excess of revenue growth is fueling a larger deficit. Although the Congressional Budget Office (CBO) initially projected the Fiscal 2017 deficit would be less than Fiscal 2016, the CBO now expects the current deficit will be $109 billion more than last year.

Are you concerned that spending is increasing by 6% while revenues are increasing by 2%?

Government Waste

Congress passed the Improper Payments Elimination and Recovery Act of 2010 that was intended to eliminate improper payments made by the federal government. The legislation also requires the General Accounting Office to issue an annual report on the effectiveness of the government in identifying and eliminating improper payments.

The report on Fiscal 2015 spending was recently released and the findings were not encouraging. Of the 15 agencies examined, the total improper payments were estimated to be $132 billion. This represents nearly 4% of all federal spending in Fiscal 2015. While these are only estimates, the percentage and amount is fairly consistent with prior years.

It's currently estimated the federal government made improper payments of $1.2 trillion between 2003 and 2016. This means that at least 5% of the $20 trillion national debt is a result of waste, fraud and abuse. To add more salt to the wound, there doesn't seem to be any major shift in the near future that will dramatically reduce the amount of improper payments.

What is your reaction to the federal government wasting more than $1 trillion because of financial mismanagement?

The Trillion Dollar Plugs

Stories continually surface about fraud, waste and abuse of taxpayer dollars. Whether fact, fiction, big or small, they all have a common thread; an erosion of public trust in the government. Financial mismanagement can occur with individuals, companies and charities as well, but given the enormity of the U.S. government, errors by the federal government impacts a large number of people.

Wasteful spending by the Department of Defense seems to be a recurring problem. Ever heard about those $600 dollar toilet seats? Last week a Department of Defense Inspector General report discovered the U.S. Army's accounting records were so bad, they recorded $6.5 trillion of wrong accounting entries in Fiscal 2015 in order for their books to balance. 

In the world of accounting, a "plug" is referred to an amount that can't be identified but is recorded to balance the books. As a simple example, you may be balancing your checkbook and you're off by $10 that you can't find. What do you do? You simply adjust the balance by $10 for your checkbook to be in balance with the bank. Accountants refer to the $10 as a plug.

Back to the U.S. Army. In order for Army's books to balance last year, the cumulative total of their plugs was $6.5 trillion. That doesn't necessarily mean they lost $6.5 trillion or there was that much fraud. However, it does indicate some fairly atrocious accounting practices. The budget for the entire Department of Defense was less than $600 billion in 2015. It's unfathomable how one branch of the military could have errors more than 10 times the entire Defense budget.

These trillion dollar plugs may be primarily accounting errors and not the loss of real dollars. However, it doesn't instill much confidence in the government's ability to appropriately manage our money if their systems are that messed up.

Deficit Spending: The Exception or the Rule

Deficit spending occurs when expenditures exceed revenues. In the past 80 years, the U.S. government has spent less than it received a mere seven times. It has happened only once since 1960 (in 2000). With this track record, it seems fairly clear that deficit spending is the Rule for Washington and not the Exception. 

There may have been lots of economic, political and social reasons why the government has incurred a budget deficit, but the pattern is clear. The U.S. government continuously spends more than it receives. 

With this track record, any sane financial adviser would tell you to change your behavior. You simply can't spend more than you make forever, and neither can the U.S. government. Despite the warnings and some attempts by Congress to balance the budget, Congress has not been able to break the habit of overspending. Based on the current budget projections, the U.S. will continue to deficit spend for the next decade.

What will it take for our government to change the habit from deficit spending to balanced budgets, at least more than once every 50+ years?