Tax revenues still crashing
posted at 2:55 pm on August 3, 2009 by Ed Morrissey
No wonder Barack Obama delayed the release of the budget numbers after the second quarter. The Associated Press took a look at the revenue side, and it’s disastrous. Revenue continues to fall far short of expectations, which means that the budget deficits predicted will expand even further:
The recession is starving the government of tax revenue, just as the president and Congress are piling a major expansion of health care and other programs on the nation’s plate and struggling to find money to pay the tab.
The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion.
Other figures in an Associated Press analysis underscore the recession’s impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever.
The AP also supplies this interesting graphic:
The big takeaway on this graph is the difference between corporate and individual tax revenues at various points on the economic cycle. Despite the oft-repeated canard that the Bush administration favored big business, the biggest increases in corporate tax revenue in the last generation came during the Reagan and Bush years. During most of the Clinton administration, individual tax revenues rose faster than corporate tax revenues. That is remarkably true during the peaks of economic growth in 1984-5 and 2004-7.
With revenues dropping and with businesses struggling, those rosy deficit projections made in the first months of the Obama administration will crash on the rocks of economic reality. That’s why Obama wanted those numbers hidden during July, when he hoped to get his ObamaCare bill passed. The AP quotes William Gale at the Tax Policy Center as noting that the lack of recovery would mean that no one’s domestic agenda stands a chance of passing, as the money won’t exist. Obama knows this and hoped to get it passed before people realized that the money already has disappeared.
Blowback
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Imagine a second time. How would that look at the bond markets?
lorien1973 on August 3, 2009 at 3:41 PM
I anticipate the poor Treasury auctions are going to take care of the markets soon. I have witheld investment dollars in anticipation. They may come out with an estimate to be revised later, and hope that the media spin it for them.
Vashta.Nerada on August 3, 2009 at 3:43 PM
The thing to watch here is is how many the Treasury’s notes are bought by the Fed. In effect buying our own paper to keep the illusion going.
I read a bond report that stated that of the 10 largest buyers of our debt last year 9 are net sellers this year. The only chumps still buying are individual investor’s.
Archimedes on August 3, 2009 at 3:57 PM
That is just depressing.
Terrye on August 3, 2009 at 3:58 PM
Yeah, look at the graph, that’s a pretty big dip. Speaking of big dips, just who has been setting the budgets since the 2006 election? Hmmmmm?
PackerBronco on August 3, 2009 at 3:58 PM
How much does an AR-15 cost?
BPD on August 3, 2009 at 3:51 PM
I’d guess around $800 to $1,000. Ammo will cost a lot too.
Any knowledgeable gun posters our there?
Sapwolf on August 3, 2009 at 3:54 PM
Prices are up, you can get a good used one for that, but new is more like $13-$1500 now.
Archimedes on August 3, 2009 at 3:58 PM
Holy Cow. If a congress member ever reads these comments….Please please please stop spending so much money. We can take care of ourselves. Stop acting as if we were children in need of care….either stop, or we will stop you
skree on August 3, 2009 at 4:00 PM
A successful parasite doesn’t kill its host. What went wrong? That transform America thingy?
a capella on August 3, 2009 at 4:01 PM
Can we trade Obama for, say, that conservative Briton. The Europeans seem to like Obama a lot. We could throw in his cabinet to sweeten the pot.
BuckeyeSam on August 3, 2009 at 4:02 PM
Biggest Loser – Obama Edition.
faraway on August 3, 2009 at 4:04 PM
KentAllard on August 3, 2009 at 3:46 PM
Is this the reason that the banks will not process short sales? I’m assuming so. They do not have to count the loss if the property is continually tied up in short sale paperwork?
ORconservative on August 3, 2009 at 4:06 PM
An illusion is quite apt. The purpose of the Fed buying Treasury paper is to hold interest rates down. The big question is how long the Fed can utilize this method to artificially hold rates down.
ICBM on August 3, 2009 at 4:08 PM
Depends on the brand etc. $900 – $1100
Somebody here suggested getting the parts to build your own.
The best way is to get a stripped lower receiver – that’s the aluminum housing that forms the bottom half of the rifle. Those run around $150 -$ 200 or so. That’s also what the government considers to be the heart of the ‘gun’ since that’s the part that has the serial number. You’ll need an FFL to get that or an FFL to do a transfer for you.
In addition to the lower receiver, you’ll need a lower parts kit and an upper in order to assemble a complete rifle.
Chainsaw56 on August 3, 2009 at 4:08 PM
This will soon start effecting all those middle class voters that got Obama elected. I wonder if their new lower class status will be any kind of learning experience? Hopefully having a complete dolt with nothing more than unicorn dreams and zero experience is worth going broke for each of them.
Clinton lied all eight years of his impeached presidency, but the economy was doing well. Let’s see how America deals with Dems lying during a major economic collapse.
Hening on August 3, 2009 at 4:09 PM
The thing to watch here is is how many the Treasury’s notes are bought by the Fed. In effect buying our own paper to keep the illusion going.
I read a bond report that stated that of the 10 largest buyers of our debt last year 9 are net sellers this year. The only chumps still buying are individual investor’s.
Archimedes on August 3, 2009 at 3:57 PM
An illusion is quite apt. The purpose of the Fed buying Treasury paper is to hold interest rates down. The big question is how long the Fed can utilize this method to artificially hold rates down.
ICBM on August 3, 2009 at 4:08 PM
Till currency exchange rates make it painfully clear that the jig is up!
Archimedes on August 3, 2009 at 4:10 PM
Confessions of a Shop Ahocholic: Obama and Democrats are on a spending spree while the rest of the country is cutting their budgets.
TN Mom on August 3, 2009 at 4:12 PM
They seem to be stabilizing now – the supply is catching up with demand.
Some people probably just bought some to resell at a profit, and they’ll buy some more when and if the prices come back down.
Chainsaw56 on August 3, 2009 at 4:14 PM
KentAllard on August 3, 2009 at 3:46 PM
I agree. This guy is daily reading for me. However, I am trading the rally, usually with options, and closing the positions every day.
riverrat10k on August 3, 2009 at 4:15 PM
I think we are starting to see how they are dealing with it through the town hall meetings that have been posted on HA…but there will always be those few kool-aid drinkers out there that think big O and the other (D)s are the end all be all for this country…
cmsinaz on August 3, 2009 at 4:15 PM
In my part of California, a new AR-15 retails for $2,500.
When it became clear that Obama would win the Dem nomination, I went out and bought 4 of them at $900 each.
guntotinglibertarian on August 3, 2009 at 4:17 PM
Ed: The chart is depressing. But the “comparative” benefit of the view (corporate versus individual tax revenues) is not all that helpful. The relative volitility of the corporate income tax is not that surprising. States see this all the time. There are many many fewer corporate taxpayers than individual taxpayers and individual tax collections are significantly greater than corporate tax collections.
clorensen on August 3, 2009 at 4:18 PM
You are correct. Many banks are bankrupt. By holding their non-performing loans, they do not take an “asset loss” but only income loss. Read Market Ticker.
riverrat10k on August 3, 2009 at 4:19 PM
With the feds gobbling almost two trillion out of the private sector, why would anyone risk any capital on a rosy future scenario. We are all just battening down for a long haul of liberal policy effects.
jukin on August 3, 2009 at 4:19 PM
Everyone at HotAir (except for the lefty trolls) knew this would happen. Everybody knew it. Everybody! That’s what’s so pathetic and dully frustrating about it. The consequences of these f-ed up policies are as plain and predictable as “2+2=4″ but the media/Obama geniuses in the Beltway refused to see it. So here we are. Up that famous creek.
Django on August 3, 2009 at 4:20 PM
The Congress is simply full of idiots…there is no money. Stop spending and promising….If they do not stop they had better get out the asbestos undies as the folk with torches and pitchforks are on their way.
JIMV on August 3, 2009 at 4:22 PM
Boy, is THAT an interesting chart! We could spend all day speculating on it. I am fascinated by the steep downturn in corporate tax revenues beginning in 2005. The economy overall was gaining jobs and growing until well into 2007. The only economic factor I an think of that could correlate to a 2005 downturn is that the Fed started ratcheting interest rates back up in late 2004, from its post-9/11 low.
If corporate taxable income was dropping this fast in 2005 and 2006, why did the stock market not reflect this? I don’t recall earnings dropping so fast, so why did revenues fall? Were companies still making profits but figuring out ways to move the money around and not owe taxes?
And why have corporate tax revenues fallen since mid-2008 at over three times the actual contraction of GDP? I don’t get it.
We need a good economist to sort this out for us!
rockmom on August 3, 2009 at 4:30 PM
The US Debt Clock tells the whole story in a snapshot.
keep the change on August 3, 2009 at 4:30 PM
I suggest starting with a shotgun. Ammo is a bit cheaper and seems to be in better supply (unless you pick up some exotics… that I love :D). As far as a shotgun, I recommend the Mossberg 500 Tactical. I just got mine and it is much better than my older Remington. The action is smooth and it is very comfortable.
Wolftech on August 3, 2009 at 4:32 PM
Yes, absolutely. Another unintended consequence of mark-to-market accounting rules. Lenders HATE short sales. They can’t be done through automation or outsourced. They require individual attention which is expensive. Sometimes investors will not allow them. And then if a short sale is completed the owner of the loan has to recognize the loss, and often go back and restate previous financial statements because of the loss.
rockmom on August 3, 2009 at 4:34 PM
AR price estimate here in CT:
Bare bones, bargain basement, build it yourself ~$650-$750
Perfectly good, entry level shooters ~$750-$950
Quality rifles with some extras ~$1100 and up
Durham68 on August 3, 2009 at 4:37 PM
You know, Ogabe’s insane spending and socialist agenda have obscured one central fact: no matter what we do, Medicare, Medicaid and Social Security as they currently exist are totally unsustainable. That’s been obvious for some time now, but instead of grappling with that reality, Congress is simply layering more tinsel on a dead Christmas tree.
FDR and LBJ made put these Ponzi schemes together for one reason: to create a permanent dependent class which would vote Dem to protect their benefits.
There are only 3 solutions:
1. Vastly reduced benefits
2. Vastly increased taxes
3. Inflate the currency
Option #2 doesn’t work because there will never be enough tax revenue to fill the hole without beggaring the economy.
Option #3 doesn’t work because it’s simply an illusion and will not only destroy the economy but spark civil chaos.
We’re left with option 1, folks, but no one has the guts to say so and Congress will never face reality.
Instead, we’re debating just how much deeper a hole we should be digging.
Putting simply: people should have been incentivized to save for their late-life medical care and their retirement funding. But they weren’t; instead, they consumed as though there was no tomorrow.
Tomorrow is here.
guntotinglibertarian on August 3, 2009 at 4:41 PM
Hard to see how that can be so, when they retail at $2,500 in California – with a 6-week backorder.
guntotinglibertarian on August 3, 2009 at 4:46 PM
Sorry if this has already been posted, but this is the most encouraging thing I have seen in a LONG time (since Nov. 2008 at least).
http://www.youtube.com/watch?v=UOLs7Cybnqw
The lady who asks him if he swore with his hand on the Bible to uphold the Constitution and what about healthcare, cap and tax and how is that constitutional. Amazing.
txmomof6 on August 3, 2009 at 4:50 PM
KentAllard
You hit the nail on the head.
I agree banks are keeping losses off the books by not foreclosing or renegotiating mortgages. The losses, given the leverage, in the banking system, would make a lot of lending institutions immediately insolvent.
It seems they are trying to hold on until inflation erodes their losses. Problem being its a Mexican standoff. Everyone deleverages and waits for everyone else to leverage back up and kick the velocity of money back up to its previous speed.
I’ve watched the Pinehurst Nc, beach area of Nc, and the Lake Tahoe real estate markets this past year — as if I could ever afford to live there! But, what I’ve noticed, just recently, is that the lists or foreclosures and short sales is growing — rapidly! There are virtually no beach properties in Nc being sold at anything near appraised tax value…
If the wealthy and uber wealthy can no longer afford their McMansions look out! And, the supposed coming avalanche of commercial defaults is yet to hit the system!
It would have been better if we had spent the TARP funds to “simply” unwind the entire tsunami of real estate derivative packages that drowned the world financial markets. Unwinding everything would have been costly. But, it would have removed uncertainty as to asset vaules by fairly divided up the winners and losers according to responsibility.
trollkiller on August 3, 2009 at 4:51 PM
Hard to see how that can be so, when they retail at $2,500 in California – with a 6-week backorder.
guntotinglibertarian on August 3, 2009 at 4:46 PM
An out of the box AR-A2 in fly-over country is ’bout the same as CT prices it seems. I have no idea whats going on out there in CA.
Archimedes on August 3, 2009 at 4:52 PM
Sorry if this has already been posted, but this is the most encouraging thing I have seen in a LONG time (since Nov. 2008 at least).
http://www.youtube.com/watch?v=UOLs7Cybnqw
The lady who asks him if he swore with his hand on the Bible to uphold the Constitution and what about healthcare, cap and tax and how is that constitutional. Amazing.
txmomof6 on August 3, 2009 at 4:50 PM
Sweeeeet!
Archimedes on August 3, 2009 at 4:53 PM
Just saw that movie last night, hilarious, and now that you mention it, very much like the Dems.
txmomof6 on August 3, 2009 at 4:55 PM
A Realtor friend of mine told me last week that 105 houses hit the MLS in my area just in the last month. This is a very upscale suburb with lots of “executive homes.” She said it is a delayed response to last year’s meltdown, as the severance checks have run out and the homeowners can’t pretend anymore. Others are finally hitting the resets on their option-ARMs and the 3-year ARMs they took out at the peak of the boom in 2006. They can’t get their loans modified because they are still unemployed.
rockmom on August 3, 2009 at 4:57 PM
Exactly what the Japanese tried to do. In their late-1980′s bubble banks were holding commercial real-estate loans that were so out of wack with the real value of the properties that they just sat on them, rather than take the hit.
Result: the “Lost Decade”.
guntotinglibertarian on August 3, 2009 at 4:59 PM
It would have been better if we had spent the TARP funds to “simply” unwind the entire tsunami of real estate derivative packages that drowned the world financial markets. Unwinding everything would have been costly. But, it would have removed uncertainty as to asset vaules by fairly divided up the winners and losers according to responsibility.
trollkiller on August 3, 2009 at 4:51 PM
IF, and thats a mighty big if as deficit spending outside of war-time is disasterous, but if they truly wanted to stimulate the economy they could have sent out a $5500.00 check for every man , woman and child in america. $24k for the avg. family, now THAT would have a stimulating effect. That is what $787billion between a pop. 310million appx. works out to.
Archimedes on August 3, 2009 at 5:00 PM
Aim surplus has stripped lowers for $89 plus shipping. Transfer is $20 or $25 depending where I go. Mayguns.com has rifle kits in stock from del-ton or rock river between $539 and $589 plus $25 shipping.
Gunbroker.com has Bushmaster, RRA, Del-ton, DPMS AR’s with Buy-it-now prices between $750 and $1000
California Legal seems to be a bigger problem than the AR bubble. And that’s sayin something coming from CT.
Durham68 on August 3, 2009 at 5:01 PM
trollkiller on August 3, 2009 at 4:51 PM
That’s exactly right. The money infusion should have been used to diffuse the coming bust. People are being given the same kind of weird excuses in the renegotiation process that they are being given for short sales. Dumb excuses. Like, no renogotiated mortgage because you went through a broker. Well, who doesn’t?
The emperor has no clothes and they can not keep hiding the fact.
ORconservative on August 3, 2009 at 5:02 PM
Apparently we have shrugged.
I think this is wonderful news. Hear me out.
I think that our government has turned against us. They have become as King George was to the Founding Fathers. Someone somewhere made mention that the Declaration of Independence sounds like a trip through the conservative blogs:
We are starving the beast. We have it by the throat and they are beginning to notice.
For the first time since election day, I am starting to feel hopeful about turning the ship of state around. It’s going to be a painful time, but I think we can do it.
turfmann on August 3, 2009 at 5:02 PM
Sleeper cell?
getalife.
Del Dolemonte on August 3, 2009 at 5:13 PM
The economic recovery that Clinton claimed credit for in reality negan 18 months before the media elected him, in March of 1991. If the media had reported it as it was happening, he never would have been elected in the first place, so they never reported it.
Del Dolemonte on August 3, 2009 at 5:16 PM
President Okiedoke trying to hookwink the public so as to perpetrate a fraud? Say it ain’t so.
Dusty on August 3, 2009 at 5:17 PM
guntotinglibertarian
Well, they aren’t going to cut services. So, we’ll just keep increasing the degree to which we monetarize the debt.
Given the current rates for treasuries, and the lack of willing buyers, the Fed and Treasury will have little or no means to drain the liquidity out of the system if/when the velocity of money spools back up. The feedback mechanism becomes a vicious cycle where we print even more treasuries and, hence, more dollars to pay for them.
The value of our exports versus our imports will start to drop with the devalued dollar. Can you say a major jump in oil prices… Our borrowing costs will also increase as foreign holders of our currency no longer want to either hold our currency or buy our debt with it. We will simultaneously have to offer them more currency for any given good and more interest for any given amount of debt — which will lead to more printing of debt and money as trade deficits and government debt is highly correlated.
It is an ever increasing vicious cycle which will grow in dimension at an ever increasing pace.
Hyperinflations are short lived creatures but very destructive ones. We printed the money for Bolivia, I believe, some years back. At the height of their hyperinflation, by the time their money arrived by ship in country it was no longer worth the cost of shipping charges in terms of dollars. That’s right — the entire boatload of money would not pay the cost of its own freight!
I’m not saying we are headed in that direction. BUT, we have more than doubled the money supply in the past year or two. And, the money supply is going to get a lot larger, a lot faster in the future with the current level of govt. spending on social welfare…
trollkiller on August 3, 2009 at 5:47 PM
I never was an advocate of Obama deliberately harming the economy to advance his socialist agenda but with reports like this where he hides numbers in hopes of passing disasterously expensive Bills has me second guessing my prior defense of him trying to do the right thing in all the wrong ways.
Yakko77 on August 3, 2009 at 5:53 PM
Excuse the typos!
trollkiller on August 3, 2009 at 5:54 PM
$1300-$1500 is about right around here. Now some….shhh..accessory items…
Jeff from WI on August 3, 2009 at 6:19 PM
With the economy heading into a super recession or a super depression or both, isn’t it time to strike up the band and have a few rousing choruses of Happy Days Are Here Again?
burt on August 3, 2009 at 6:20 PM
“Desperate people do desperate things”
allrsn on August 3, 2009 at 8:17 PM
A semi-automatic AK-47 can be had for $300-$500 I believe. The ammo is fairly cheap as are the 30 rd. mags. and cleaning it is a simple… not that the darn things really need it but I clean mine after every trip to the range anyways.
Yakko77 on August 3, 2009 at 9:37 PM
So how much did you have to pay them to use that graphic?
disa on August 3, 2009 at 11:21 PM
To be sure we ‘close the sale’ could we also throw in Massachusetts?
Red State State of Mind on August 3, 2009 at 11:44 PM
If so, she’s doing a great job of camoflauging (sp?) herself, what with the “y’all” and the coherent sentences.
Red State State of Mind on August 3, 2009 at 11:48 PM
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