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Federal Expenditures Topped $1 Trillion for February Alone, Says U.S. Treasury

Individual income tax receipts took a noticeable boost in January 2011 because of the expiration of the Making Work Pay tax credit in December 2010. This tax credit was worth 6.2% of an individual’s earned income for those who make $75,000 or less, with a maximum credit of $400 per person. Though, the increase of tax receipts from the expiration of this tax credit was partially offset with the institution of a new tax credit. Within the tax bill recently passed in the lame duck session, social security taxes decreased 2%. As a result, social security taxes went from 6.2% to 4.2%, but this tax credit expires at the end of 2011. These adjustments in the tax code have led to the overall rise in individual tax receipts. - Federal Budget Facts January 2011, LeftandRightNews, February 10, 2011

March 3, 2011

CNSNews.com - Monthly federal expenditures topped $1 trillion in February, says the U.S. Treasury Department. A majority of this money was disbursed to meet the government’s escalating debt obligations.

In its Daily Treasury Statement closing out February, the Treasury Department reported that the government had spent $1.009944 trillion (rounded to the nearest million) during the month.

(The itemization of this remarkable number can be found in the Daily Treasury Statement hyperlinked here. It is the line item labeled “Total Withdrawals (excluding transfers)” in the “Withdrawals” column of “Table II—Deposits and Withdrawals of Operating Cash.”)

Although the budget documents that were released by the White House last month estimated that the federal government would bring in $2.174 trillion in revenue this fiscal year and spend $3.819 trillion—running an annual deficit of $1.645 trillion—these calculations cloaked the biggest factor in actual federal spending: maintaining the government’s massive and constantly churning debt load.

In February, in fact, according to the Treasury Department’s Daily Treasury Statement, the government needed to spend $585.08 billion from its cash accounts to just pay off the holders of Treasury securities that matured during the month and were redeemed. Paying off its obligations to the holders of Treasury securities is by far the government’s greatest monthly expense.

To help meet this and other government obligations in February, the Treasury turned around and borrowed $660.86 billion during the month by selling new securities that increased the net national debt by $63.71 billion—bringing the total national debt to $14.19 trillion ($14,194,764,339,462.64) by the end of the month.

But making the debt load bigger by adding another $63.71 billion to the national debt was not all the government did to come up with the $1-trillion-plus it needed to cover all federal spending in February. The Treasury also drew down the cash balance in its accounts by $158.5 billion--starting the month with $349.14 billion cash on hand and ending it with only $190.61 billion.

The government’s other relatively large expenditures for February were dwarfed by the spending needed to meet the obligations it incurred in maintaining the debt.

These other expenditures, as itemized in the Daily Treasury Statement, included:

• $49.47 billion for Social Security benefits,*
  
• $44.03 billion for Medicare benefits,
• $35.89 billion for the interest on the national debt,
• $27.35 billion for Defense Department vendors,
  
• $23.04 billion for Department of Education programs,
• $13.39 billion for salaries of federal workers, and
• $5.07 billion for insurance benefits for federal workers.

The Treasury also needed to pay $95.14 billion in tax refunds to individual Americans who had overpaid their taxes and $3.48 billion in refunds to businesses that had overpaid their taxes.

* Federal receipts in January 2011 for Social Security were $47.15 billion, $2.32 billion less than the $49.47 billion paid out in February 2011. The tax bill signed into law late last year decreased Social Security taxes by 2% (from 6.2% to 4.2%), which has contributed to the $2.32 billion shortage. This 2% payroll tax cut is the beginning of the end of Social Security as we know it. Worker contributions have successfully funded the program for 75 years and that critical linkage between contributions and benefits is what keeps Social Security a self-funded program. Proposals like this threaten the program’s independence, forcing Social Security to compete for limited federal dollars. [Source]

A review of the Treasury Department’s Daily Treasury Statements for the past decade indicates that October 2008 was the first time the Treasury ever disbursed more than $1 trillion in a single month. In that month, total federal expenditures were $1.069960 trillion—sharply up from $748.106 billion in September of 2008.

October 2008 was the month President George W. Bush signed a $700-billion law to bailout failing banks. (Then-Sen. Barack Obama voted for that law.) Since that watershed month of October 2008, there have been another 13 months when federal expenditures have exceeded $1 trillion.

While actual federal expenditures vary somewhat from month to month, federal expenditures just about doubled—even when adjusted for inflation--from February 2001 to February 2011.

In February 2001, total expenditures from the Treasury were $407.195 billion in 2001 dollars. Adjusted for inflation, that equals $506.35 billion in 2011 dollars—or only about half of the $1.00994 trillion the Treasury spent in February 2011.

The biggest single factor in this doubling of monthly government spending is the government's ever-increasing debt and the need of the Treasury to sell an ever-greater dollar value in securities in order to pay off older securities that have come due and secure the revenue to pay other government expenses that exceed the government's revenue from taxes.

In February 2001, the Treasury paid $201.24 billion ($250.24 billion in 2011 dollars) to the holders of securities that were redeemed in that month. It then turned around and borrowed another $211.7 billion by selling new securities, thus increasing the net debt of the country by $10.46 billion that month.

As noted, a decade later in February 2011, the Treasury paid $585.08 billion to the holders of securities that were redeemed that month—more than twice what it paid in February 2001. Then the Treasury turned around and borrowed another $660.86 billion during the month, thus increasing the net debt of the country by $63.7 billion.

Another way of looking at it is this: In February 2001, the government needed to find creditors willing to loan it $201.24 billion so it could pay its bills in that month. In February 2011, the government needed to find creditors willing to loan it 660.86 billion so it could pay its bills that month. Each new month that the government runs a deficit, it will need to increase the nation's debt, which means the amount it will need to borrow in future months will be greater still as an ever-growing inventory of older loans comes due and can only be paid off by rolling them over into new loans--at the same time the government is also taking out new loans just to cover that particular month's new deficit spending.

The federal government is climbing an upside-down pyramid of debt. The further it goes, the more it owes.

On February 28, 2001, the national debt was $5.74 trillion. On February 28, 2011, it was $14.19 trillion.

Given that the Census Bureau estimates there are 112,611,029 households in the United States, the national debt now equals $126,051 for every household in the country.

(To see a month by month accounting of the actual amount disbursed from U.S. Treasury accounts over the past decade as reported in the Daily Treasury Statement click here.)

Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program and Medicare's Hospital Insurance (HI) program are financed primarily by employment taxes (social insurance taxes) or FICA. The Federal Insurance Contributions Act (FICA) tax is a United States payroll (or employment) tax imposed by the federal government on both employees and employers to fund Social Security and Medicare—federal programs that provide benefits for retirees, the disabled, and children of deceased workers. The amount that one pays in payroll taxes throughout one's working career is indirectly tied to the social security benefits annuity that one receives as a retiree. This has led some to claim that the payroll tax is not a tax because its collection is tied to a benefit. The United States Supreme Court decided in Flemming v. Nestor (1960) that no one has an accrued property right to benefits from Social Security. [Source]