Everything You Heard About the Deficit Falling Is Wrong

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What seemed odder is that the deficit has always been reported as the total of those debts/expenditures relative to revenues, and simple logic says that those debts/expenditures haven't dropped, and revenues haven't increased by what is reported near a $500 billion shift....

One is tempted (if one cared to probe for a nanosecond) to ask what the Treasury Department didn’t include, but its math doesn't work even if it didn't exclude anything. Take its own report, the Monthly Treasury Statement which compiles activity from the start of the current fiscal year (October 2012) through April 2013.

A very cursory look at this report clearly reveals some items that don’t actively support the report’s optimistic subtitle.

Take Table 1. The numbers show that there have been $1.603 trillion in budget receipts so far for fiscal year 2013 vs. $2.090 trillion in outlays. This indeed produces a value for a current deficit (outlays minus receipts) of -$487 billion.

The same table also shows there were $1.383 trillion in receipts for the same period in 2012 and $2.1 trillion (about the same as this year) in outlays. Combining those figures, we do get a  comparative deficit this time last year of -$719 billion. Okay, so far, it's on point with the headline's cheer.

However, just below Table 1 comes some small print. The Treasury Department appears to have changed some accounting methods. The small print reads: "The deficit figure differs by $2.23 billion due mainly to revisions in the data following the release of the Final Monthly Treasury Statement." There’s no clarity about how those revisions changed numbers, and the changes are small in the scheme of things, so let’s raise an eyebrow and move on for now—to the good part.

Even if we pretend those changes don’t matter and even if the rest of this year's receipts come in 16 percent greater than they did last year (which on average  is what this table is indicating so far), we'd still get a total of $1.603 trillion receipts plus an expected $1.234 trillion. That equals $2.614 trillion in total receipts for 2013. Remember that number for a moment.

Now, consider that even if the rest of this year's expenditures remain flat to last year's (like the first part of the year indicated), there would be $3.5 trillion in outlays for 2013. If we subtract that $3.5 trillion in outlays from $2.614 trillion in receipts, we get a total deficit of approximately $886 billion; certainly not the $642 billion the CBO recently announced.

But there’s more. There’s Table 2.

According to Table 2, those expenditures actually won't be flat, instead they will be higher, by about $184 billion, to reach $3.684 trillion.

Subtracting $3.684 trillion from $2.614 trillion, we get a total expected deficit of approximately $1.069 trillion—or about the same as it has been over the last couple of years—and again not the $642 billion that the media spread, and that Krugmanites consider reflective of fiscal stimulus working for the overall economy.

There’s a danger in working with numbers. They can be massaged and bent and faked and shrouded with suppositions. But, that’s not the case here. This is a case of simple addition and subtraction using Treasury’s own report. Doing so reveals a discrepancy between the recent headline deficit number and the one in the report. The issue here isn’t whether government stimulus works or not (nor how it was designed and who it really helps most beneath associated political rhetoric), but about why people can be so eager to be right about the nature of the forest, they ignore the fact that they are running smack into a tree right in front of them. Let’s at least agree about the tree, and move on from there.