Fiscal 2018 Deficit by Month

The graph below charts the monthly budget deficit or surplus of the U.S. government for the fiscal year ending September 30, 2018. The cumulative deficit for Fiscal 2018 was $782 billion, which was slightly less than initially projected.

Because of the timing for month-end payments, approximately $55 billion of expenditures that normally would have been paid in September, were paid in August. This timing difference caused the August deficit and September surplus to be much larger than normal.

As depicted in the graph, the government spent more than it receives nine months out of the year. The surpluses in January, April and September correspond with the timing of when estimated tax payments are due. However, the excess in these three months was not large enough to pay for the other nine months of overspending.

What do you think of a budget that overspends nine out of twelves months?

Broken Process = Bad Results

If you’re concerned about the continued rise in the federal debt, you’re probably not very pleased with the spending bill that recently passed Congress. The $1.3 trillion spending plan, only covers about 25% of total federal spending. The U.S. government spends another $3 trillion for what is classified as mandatory spending (e.g. Social Security, Medicare, Medicaid, interest on the debt). 

Although there are a lot of aspects to increased spending, the process is a contributing factor. As one Representative opined, “Nothing good comes from legislation passed at the deadline.” Members of Congress know that last-minute, must-pass legislation is an opportunity for a lot of pork-barrel spending.

Congress has a budget and spending process but hasn’t followed it for years. The process begins with a proposed budget by the President in February. Congress then passes it’s own Budget Resolution by May, followed by 12 different Appropriations (spending) bills, that can be enacted before the beginning of the fiscal year on October 1.

For the current fiscal year, Congress didn’t pass its Budget Resolution until November and just passed the spending bill in March; nearly 6 months after the fiscal started. Instead of passing 12 different spending bills, everything was rolled into one massive 2,200+ page bill, that was passed within 24 hours of being written. 

Following the process doesn’t guarantee a balanced budget or reduced spending. However, Congress’ failure  to follow its budget process is helping to drive increased federal spending.

Do you agree the broken process is leading to bad fiscal results?

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?

Social Security and Medicare-Touch the Third Rail?

One of the most contentious issues in modern American politics involves changes to Social Security and Medicare. The subject is often referred to as the third-rail of politics.

The third rail references the high voltage rail of electric trains and subways. Contact with the third rail can lead to death. In politics, the same goes Social Security. Proposing to change the current program can lead to political suicide, or at least the loss of an election. Since getting re-election is a high priority for most politicians, it's understandable why politicians try to avoid this topic as much as possible.

No matter how hard the resistance, Social Security and Medicare will change. Why? Social Security and Medicare programs are spending more than they are currently collecting in taxes. Ignoring the potential concerns about the Social Security Trust Fund and the "Lockbox" (which are addressed in A Sinking Nation), the U.S. government predicts the retirement surplus of Social Security will be depleted by 2034 and the disability funds will be depleted by 2023. Consequently, even without any legislative revisions, future benefits will eventually be reduced to about 70% of the amount due because of a lack of funds. Of course, Congress could proactively pass legislation to fix the problem, but it would require them to touch that third rail.

Although 2034 sounds like a long time in the future, it's less than 18 years away. Do you remember Y2k and the start of a new millennium? Seem like a long time ago? The new millennium started 16 years ago, and we're nearly halfway to 2034. In reality, 2034 will be here before you know it.

Unless something changes dramatically in Washington, don't expect Congress to take any action on Social Security in the near term. However, the fact remains... changes to Social Security will eventually occur; either through legislative changes or a lack of money.