A fiscal year is an accounting year, which is not the same as the calendar year. Most governments and publicly listed corporations keep their books on a fiscal year, rather than a calendar year.
The federal government’s fiscal year begins on October 1, and runs through September 30 (e.g. fiscal year 2010 will end on Sept. 30 of calendar year 2010; fiscal year 2011 will begin on October 1 of calendar year 2010).
State governments employ a different fiscal year, which begins on July 1, and ends on June 30.
In more sobering economic news, Automatic Data Processing, Inc. (ADP), a large payroll company, reported that the private-sector cut 10,000 jobs last month. Economists had forecasted that the report would show an increase of 17,000. The report underscores the continued difficulties smaller businesses are having in the current economic climate; while large businesses, those with 500 employees or more, added 1,000 jobs, medium and small businesses shed a combined 11,000 jobs.
Note: The ADP survey includes only private-sector jobs. The Bureau of Labor Statistics unemployment report includes government workers and will be released on Friday.
In preparation for Secretary of Transportation Ray LaHood’s visit tomorrow to Ohio to discuss the American Recovery and Reinvestment Act (aka the “stimulus”) and Washington’s plan for the road ahead, below are some facts to consider:
Ohio’s share of the $862-billion “stimulus” bill awarded: $7,556,990,000 (=3.7% of the $202 billion awarded).
Ohio’s unemployment rate rose from 9.1% when the “stimulus” was enacted in February 2009; today it is 10.7%.
Ohio’s 10.7% unemployment rate is greater than the national average of 9.5%.
The number of employed people in Ohio fell from 5.454 million when the stimulus bill was enacted, to 5.341 million currently. This translates to 112,914 jobs lost.
For FY2011, Ohio’s estimated budget shortfall is $3 billion.
Ohio’s number of foreclosed homes was 11,321 when the “stimulus” was enacted; today that number has fell to 10,379.
Example of “stimulus” spending:
$34 million will be going to Ohio’s John Weld Peck Federal Building in Cincinnati, which is only 46 years old, for a “window makeover.”
The Mohegan Sun Casino raked in over $1.3 billion in profits last year. Economic conditions caused strife for many companies in the private sector, who fought and clawed just to break even.
For the Mohegan Sun, the clawing was toward Washington: the Mohegan Sun hit a jackpot in the form of federal stimulus funds worth $54 million. From abcnews.com:
The tribe runs the sprawling Mohegan Sun casino, halfway between New York City and Boston, which earned more than $1.3 billion in gross revenues in 2009. Each tribe member receives a cut of the profits, a number a tribal official said was “less than $30,000″ per capita per year. The stimulus money is a loan from a U.S. Department of Agriculture rural development program that is meant to help communities of less than 20,000 people that have been “unable to obtain other credit at reasonable rates and terms and are unable to finance the proposed project from their own resources.”
It’s difficult to fathom why the profitable Mohegan Sun needs stimulus dollars. Favoritism in Washington must stop for businesses to reorient themselves away from government and toward activities that will secure long run growth and job creation.
The Commission is intended to propose to Congress policies that will help balance the budget, examining the growth of entitlement spending, and the gap between the projected revenues and expenditures of the Federal Government.
Nearly every budget in the last 10 years is guilty of the “budget creep” phenomenon. The table below outlines both President Bush and President Obama’s future budget proposals:
The problem:
From President Bush’s FY2007 budget to President Obama’s FY 2011 budget, proposed spending for FY 2011 grew by $594 billion. If we were actually going to spend in FY2011 what was slated in FY2007 the deficit would be half of the size. The graph below shows spending estimates for FY2011 in each of the last five administration budget proposals.
This year’s budget proposal increases FY2011 spending by more than $200 billion over what the Administration proposed for FY2011 last year – yet another piece of evidence of the budget creep phenomenon.
Our country’s spending and debt situation explained in a fast-paced motion graphics video (runtime is 2:20 minutes):
According to a recent GWU Battleground poll, nine in 10 likely voters are at least “somewhat” concerned about the current level of government spending. 74 are “extremely” or “very” concerned. And 58 percent think the level of spending is unsustainable.
Is the public right? Is Washington bankrupting America? Some facts from the video:
Spendingper household has risen over 40 percent in the last 10 years – and is set to do so again in the next 10 – pushing debt (and interest on the debt) to unprecedented levels. But that’s just a result of past spending.
Add in our government’s $106 trillion in future spending commitments – that cannot be paid for – and it becomes clear that our government’s spending is setting the country down a path toward bankruptcy.
We can solve it, but politicians will have to make tough choices.
Increasing taxes can’t do the trick ($106 trillion is equivalent to taking all of the taxable income from every American nine times over), nor is it fair to saddle taxpayers with a problem created by government irresponsibility.
We need real spending reform. Merely returning to the spending per household levels of the 1990s would balance the budget in three years.
Yet, policies under Bush and Obama have made the problem worse, not better: budget cuts that pale in comparison to spending increases, more lobbyists, more earmarks, expanded spending on autopilot programs like Social Security and Medicare, and savings gimmicks that don’t amount to meaningful change.
Reform can only be achieved if the public is informed and engaged. You can start by doing the following:
(1) Share this video with at least 5 friends, family and coworkers.
(2) If you haven’t already, subscribe to receive emails from us (you’ll be first to receive our videos and other timely info about economic policy).
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Below are sources for data featured in the video:
Our spending is unsustainable. Over the last 10 years, federal government spending per household increased by over 40 percent….and will do so again in the next 10 years.
Source: calculations based on data from the Office of Management and Budget for spending totals (Historical Table 1.1 for spending in 2000 and 2010; Summary Table S-1 for 2020) from the FY2011 Budget of the United States and the Census Bureau Table HH-1 for number of households (note: 2020 household figure determined based on an extrapolation of 2000-2010 household growth).
Over the last 10 years, federal government debt per household increased by almost 70 percent….and will do so again in the next 10 years.
Source: calculations based on data from the Office of Management and Budget (Historical Table 7.1 for debt in 2000 and 2010 and sum of “Debt Held by Government accounts” and “Debt held by the public” from Summary Table S-14 for 2020) and the Census Bureau Table HH-1 for number of households (note: 2020 household figure determined based on an extrapolation of household growth).
Meanwhile, median American household income decreased by about 1 percent in the last 10 years.
Source: Census Bureau Table H-6 (inflation adjusted dollars).
In 10 years, interest payments on the debt will more than quadrupled.
Source: calculation based on data from the Office of Management and Budget (Summary Table S-4).
In 10 years, interest payments on the debt plus autopilot programs (like Social Security and Medicare) will consume 90 cents of every federal dollar.
Source: calculation based on Office of Management and Budget Summary Tables S-1 and S-4.
Our spending is only a fraction of the commitments made. The total value of our future spending commitments – that cannot be paid for – is $106 trillion.
Source: $106.4 trillion represents the net present value of the federal government’s unfunded liabilities as calculated in Forbes by former Treasury Department economist Bruce Bartlett based on actuarial tables from the Social Security Administration and data from the Medicare Trustees Report.
106 trillion dollars = selling every home in the U.S….5 times over.
Source: Based on the Federal Flow of Funds Report from the Federal Reserve, Table B.100, line 3.
106 trillion dollars = taking all of the income of every American.…9 times over.
Source: Based on Personal Income of $12 trillion for 2009 (most recent year available) from National Income and Product Account Table 2.1 of the U.S. Government’s Bureau of Economic Analysis.
106 trillion dollars = selling every household item of value in the U.S….twice.
Source: Source: Based on the Federal Flow of Funds Report from the Federal Reserve, Table B.100, line 42.
Our spending is solvable. By merely reducing government spending per household to 1990s levels.…we could balance the budget in three years. Our spending is solvable unless Washington won’t solve it. Our spending is bankrupting America.
Source: Based on revenue projections from the Office of Management and Budget in Summary Table S-1 from the FY2011 Budget of the United States; the 1990s average is adjusted for inflation and taken from Historical Table 1.1 from the OMB); household projections are based on an extrapolation of Census Bureau Table HH-1.
The Obama Administration recently announced it would not use $15 billion in TARP funds to grease the markets that fund Small Business Administration (SBA) loans. President Obama had promised to make the $15 billion available last February, but the Treasury Department has said the $15 billion isn’t necessary because the markets “recovered on their own.”
Which begs the question: if the markets have unstuck themselves, was there ever need for government intervention in the first place? And, while SBA may provide some valuable services for American taxpayers — they provide more disaster assistance than FEMA — can’t private lenders, via market forces, determine what loans are worthwhile? After all, it was largely bad lending and borrowing practices (encouraged by government) that triggered the financial crisis to begin with.
While SBA made significant reforms in the past few years to make its systems more accountable, the default rate for SBA-back loans increased from 2.4 percent in 2004 to 11.9 percent in 2008. According to the SBA and SBA watchdog Robert Coleman, most of this increase is attributable to the downturn in the economy.
Still, this high default rate is definitely something Congress and the Administration should take into account before putting more taxpayer dollars at risk and expanding the pilot program from $21 million to $15 billion.
The Congressional Budget Office (CBO) expects Social Security will pay out more in benefits than it makes in taxes this year.
Last year, the Social Security Administration (SSA) predicted that Social Security wouldn’t begin running a deficit until 2016. But payroll tax revenue has decreased due to unexpectedly high unemployment, and benefit payouts from the government have increased as the poor job market is encouraging more people to retire early.
Despite less money coming in and more money going out, the SSA reassures seniors that their benefits won’t be affected.
For years, Social Security surpluses have offset a portion of the federal government’s deficit – extra money was given to the general Treasury and used to pay for other spending items. SSA was given bonds in return. Those bonds have been accumulating in Social Security’s “Trust Fund.” Last year, the SSA reported the Trust Fund’s assets total about $2.4 trillion – making a trust fund within the U.S. government the biggest holder of the U.S. government’s debt.
Instead of offsetting that debt, now Social Security will be adding to it. The SSA will have to begin cashing in its bonds from the Treasury. Who will reimburse Social Security? The general Treasury. Do you see the problem?
To pay SSA for those bonds, the Treasury will have to issue new debt, collect more money from taxpayers, or cut spending to free up money to give to SSA.
The Social Security Trust Fund encapsulates the problem with so-called “intra-government lending,” which is essentially lending money from one of your pockets to the other.
Imagine if an individual used this system of budgeting. You allocate a certain portion of your income to “food.” For years, you spend less than your food budget, and use that “extra” money to buy clothes, electronics, and to slightly reduce your credit card debt. You write your food budget IOUs for all the money that you’ve taken from it so that after a few years the food trust fund has thousands of dollars of IOUs. Yet when your income goes down and you actually have to cash in those IOUs, you’ll find that they are useless. You have to pay yourself back. That means you still have to come up with the money to cover those food bills while paying for everything else.
The $2.4 trillion in the Social Security Trust Fund isn’t an asset. It’s a taxpayer liability. It only means that Social Security has first dibs on money that comes into the general Treasury – that’s little comfort to policymakers trying to balance the budget or to taxpayers who are on the hook for all of government’s liabilities.
