U.S. Budget and Economy

Each week, the Federal Reserve posts the current release of Release H.4.1. at this link . This release is titled Factors Affecting Reserve Balances and shows the current numbers from what is commonly called the Federal Reserve Balance Sheet. There is a description of the Federal Reserve Balance Sheet at Econbrowser . In addition to the weekly release, the Federal Reserve posts historical data going back to December 18, 2002 . Tables 1 through 7 contain the weekly averages and tables 8 through 14 contain the corresponding data for each Wednesday. The weekly averages are the data that is most often referenced in the weekly H.4.1 release and elsewhere so that is what I look at in the remainder of this post. The following graph shows the composition of assets on the Federal Reserve Balance Sheet from 2003 through 2008: The actual numbers and sources for this and the following graph can be found at this link . As can be seen, the total assets rose slowly but steadily through 2007 and...

Note: An updated version of the following post can be found at this link . Each month, the Treasury Department posts updated estimates of the foreign holdings of U.S Treasuries by country at this link . It also posts estimates going back to March 2000 at this link . The following graph shows the totals for all countries by the type of treasury security and the totals for the three countries with the largest holdings. The purple line shows the grand total of all treasury securities held by all foreign countries, private and public. As can be seen, it has been increasing steadily since early 2002 and has accelerated somewhat in the past year. The yellow line shows those securities held by "official institutions", defined on page 7 of the Report on U.S. Portfolio Holdings of Foreign Securities at End-Year 2004 as follows: Official institutions consist primarily of national government and multinational institutions involved in the formulation of international monetary policy...

My prior post looked at the distribution of net worth according to the 2004 Survey of Consumer Finances . As mentioned, net worth appears to be heavily skewed such that about 80 percent of families had a net worth that was less than the average from 1989 to 2004. Whereas that result came from looking at net worth by percentiles of net worth, the following graph looks at net worth by percentile of income : The actual numbers and their sources can be found at this link . As can be seen, there is a positive correlation between net worth and income. That is, those with higher income tend to have a higher net worth. The data also shows that the median net worth of the top ten percent of income earners more than doubled from 1995 to 2004. The median net worth of the 80 to 90 percentile nearly doubled and the net worth of the 60 to 80 percentile went up about 71 percent during that period. The median net worth of the other 60 percent of income earners gained much less with the net wor...

NOTE: AN UPDATED VERSION OF THIS PAGE CAN BE FOUND AT this link My prior post looked at household assets, liabilities, and net worth as given by the Federal Reserve's Quarterly Release Z.1, "Flow of Funds Accounts of the United States" . While this report gives a good overview of household net worth in the United States, it gives no information about the distribution of that net worth. The only regular study of that distribution that I'm aware of is the Federal Reserve's Survey of Consumer Finances which is conducted every three years. The last one for which data has been released was in 2004. Data from the 2007 Survey of Consumer Finances is expected to be released in the first quarter of 2009. Table 3 of the 2004 Survey of Consumer Finances gives family net worth, by selected characteristics of families, from the past six surveys (1989 through 2004). It gives both the mean and the median of the subgroups determined by these characteristics so it'...

Every three months, the Federal Reserve releases Quarterly Release Z.1, "Flow of Funds Accounts of the United States" . That release includes table B.100, titled "Balance Sheet of Households and Nonprofit Organizations". Following is a description of the households and nonprofit organizations sector from page 170 of the Guide to the Flow of Funds Accounts : The households and nonprofit organizations sector consists of individual households (including farm households) and nonprofit organizations such as charitable organizations, private foundations, schools, churches, labor unions, and hospitals. Nonprofits account for about 6 percent of the sector’s total financial assets, according to recent estimates, but they own a larger share of some of the individual financial instruments held by the sector. The following graph shows this sector's assets since 1952 in trillions of 2007 dollars: The actual numbers and their sources can be found at this link . The values ...

A reader of my prior post suggested that it takes time for an economic policy to have an effect and that the analysis of the effect of a president's policy should be lagged by two years. While the idea that some effects of a policy require a two-year lag has merit, I know of no evidence that all effects require the passage of two years to begin. Some effects may begin as soon the the election result or the passage of certain policies becomes known. Hence, the following table shows annual job growth with a one-year and two-year time lag as well as no time lag. In addition, it shows job growth if the first two years of a president's term are skipped, assuming that they are effected by both the prior and current president's policies. So as to skip as little time as possible, the table looks at job growth by party, combining consecutive terms where the presidency is held by the same party. NONFARM AND HOUSEHOLD SURVEY EMPLOYMENT GROWTH BY PRESIDENTIAL PARTY (percent a...

As mentioned in my prior post , the Bureau of Labor Statistics released the August employment report on September 5th. Using that data, I updated my July 13th post regarding job growth under Bush and prior presidents. Since I plan to continue updating this post, I've now placed it permanently at http://www.econdataus.com/empterm.html . Following is an updated graph of the data: As before, the data covers the 15 presidential terms since 1949. In almost every term of a Democratic president, the growth in household survey, nonfarm, and private employment was greater than the growth in the labor force. Conversely, in almost every term of a Republican president, the growth in household survey, nonfarm, and private employment was less than the growth in the labor force. The only two exceptions in the 15 terms were Carter and Reagan's second term. A related fact is that the unemployment rate went down during almost every term of a Democratic president and up during almost every...

On September 5th, the Bureau of Labor Statistics released the August employment report. Following is the first paragraph of their Employment Situation Summary for August : The unemployment rate rose from 5.7 to 6.1 percent in August, and non-farm payroll employment continued to trend down (-84,000), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. In August, employment fell in manufacturing and employment services, while mining and health care continued to add jobs. Average hourly earnings rose by 7 cents, or 0.4 percent, over the month. The 6.1 percent unemployment rate is the highest since September of 2003 and is just slightly below the prior peak of 6.3 percent reached in June of 2003. One reason why the unemployment rate increased so much last month is revealed by the next paragraph in the Summary: Unemployment (Household Survey Data) The number of unemployed persons rose by 592,000 to 9.4 million in August, and the unemployment rate increased by ...

In my prior post , I quoted this link which stated that "the near-term balanced budget projections are illusory" for four reasons. The third reason was that the "Administration projections assume unrealistic deep cuts in nondefense discretionary programs that fund infrastructure, education, public health, disaster relief". This has not been the first time that the Bush Administration has projected deep cuts in outlays that never came to pass. The following graph shows federal receipts and outlays as a percent of GDP since 1980: The actual numbers and sources are here . The red and black lines show the outlays and receipts from the most recent budget, the one for fiscal year 2009. The portions of these lines from 2008 on (to the right of the dotted line) are projections from the 2009 budget. The orange, yellow, green, sky blue, blue, indigo, and violet lines show the projections from the 2008 through 2002 budget, respectively. As can be seen from the red line,...

On July 28th, the Office of Management and Budget released the Mid-Session Review of the U.S. Budget for fiscal year 2009. The following table summarizes updated projections of the deficit and debt from that document, both in billions of dollars and as a percent of GDP: RECEIPTS, OUTLAYS, DEFICITS, AND DEBTS (billions of dollars) Actual Estimate 2007 2008 2009 2010 2011 2012 2013 =========================== ===== ===== ===== ===== ===== ===== ===== Receipts................... 2568 2553 2651 2916 3084 3288 3439 Outlays.................... 2730 2942 3133 3094 3187 3230 3410 --------------------------- ----- ----- ----- ----- ----- ----- ----- Unified deficit(-)/surplus. -162 -389 -482 -178 -103 58 29 On-budget deficit.......... -343 -574 -663 -378 -321 -168 -172 Gross federal deficit...... -499 -672 -815 -505 -482 -375 -38...

On February 15th, Peter G. Peterson announced the formation of the Peter G. Peterson Foundation. Leading the new foundation as President and CEO is David M. Walker, who served as Comptroller General of the United States for the last nine plus years. This page of their website lists the mission of the new foundation as follows: We are dedicated to increasing public awareness of the nature and urgency of several key challenges threatening America's future, and to accelerating action on them. To address these challenges successfully, we will work to bring Americans together to find sensible, long-term solutions that transcend age, party lines and ideological divides in order to achieve real results. Further down the page are listed the challenges of "large and growing budget deficits, dismal national and personal savings rates, and a ballooning national debt that endangers the viability of Social Security, Medicare, and our economy itself". Regarding the debt, this page ...

Note: The following blog entry has been updated at this link : A March 16th New York Times editorial titled Through Bush-Colored Glasses alleged that Bush painted a false picture of the economy in a recent speech. Following is an excerpt: Mr. Bush boasted about 52 consecutive months of job growth during his presidency. What matters is the magnitude of growth, not ticks on a calendar. The economic expansion under Mr. Bush — which it is safe to assume is now over — produced job growth of 4.2 percent. That is the worst performance over a business cycle since the government started keeping track in 1945. I haven't calculated the job growth per business cycle but I have looked at the growth in employment over every presidential term since 1949. The following table shows the monthly average change in population, the labor force, employment according to the Household Survey, total nonfarm employment, and total private employment over every presidential term since 1949, along with the u...

Ralph Nader was a guest on the June 29th program of This Week with George Stephanopoulos. A video of the interview can be found here . For about 4 minutes, George Stephanopoulos and Nader talked about Nader's recent criticisms of Obama. Stephanopoulos then asked the following: Here's what I don't get. Is there any doubt in your mind that Barack Obama would be a better president for your issues, for the things you care about, than John McCain? Nader replied: Well, anybody would be better than the Republicans. Stephanopoulos then asked why Nader trained all his fire on the Democrats, Nader protested that he was simply answering the question he had been asked, and Stephanopoulos replied that this was driven by issues that Nader had raised that week. Nader did go on to spend about 30 seconds making a number of criticisms of McCain. To see firsthand how much Nader was training his fire on Obama versus McCain, I went to Nader's website at http://www.votenader.org/ . The...

My prior post looked at Net Operating Cost and Net Position as presented in the Financial Report of the United States Government. As mentioned, these two measurements are similar to the Unified Deficit and Debt Held by the Public which are presented in the U.S. Budget. The former two measurements are accrual-based and the latter two measurements are cash-based . The Net Operating Cost and Net Position are two of three major items shown in Table 1, titled "The Nation By the Numbers - An Overview", on page 3 of the 2007 Financial Report . The third major item is Social Insurance Exposures. Following is an excerpt starting on page 24 that describes this last item: For the ‘social insurance’ programs (e.g., Social Security, Medicare Parts A, B, and D), the Statement of Social Insurance (SOSI) shows the estimated future scheduled benefit expenses net of contributions and tax income (excluding interest), based on each program’s actuarial trust fund report. Table 8 shows esti...

The Government Management Reform Act of 1994 (GMRA) required the U.S. Government to submit consolidated financial statements audited by the GAO (U.S. Government Accountability Office) beginning with fiscal year 1997's Financial Report of the United States Government. Each year since then, the Administration has issued two reports that detail financial results for the government. These are the President’s Budget and the Financial Report of the United States Government. The following excerpt from page 4 of the 2007 Financial Report describes the difference between the two documents: The Budget's emphasis is on initiatives and how resources will be used , focusing on the Government's spending surplus or deficit. The Report focuses on the Government's net operating cost - how resources have been used to fund programs and services. How does the Government’s largely cash-based spending deficit differ from the largely accrual-based net operating cost? The Budget shows r...

My prior two posts looked at the effective tax rate for all taxpayers. Additional information can be obtained by looking at the effective tax rate by taxpayer income quintiles. The following graph shows the effective individual income tax rate by income quintiles (plus the top 10, 5, and 1 percent of incomes): The actual numbers and sources are at http://www.econdataus.com/efftax05.html . The graph shows an interesting thing about the Tax Reform Act of 1986. This tax cut lowered the top marginal rate from 50 percent in 1986 to 28 percent in 1988. However, the graph shows that the effective tax rate dropped for every quintile EXCEPT the upper quintile during this period. This was most noticeably true for the top 1 percent of incomes where the effective rate rose from 18.3 percent in 1986 to 20.7 percent in 1988. As the numbers show, the average pretax income for the top 1 percent of incomes was between $689 thousand and $867 thousand during this period, well within the top margi...

The seemingly close correlation between the total effective tax rate and total revenues (mentioned in my prior post ) leads to another surprising fact. Suppose that the correlation can be represented by the following formula: effective_rate = k * (taxes_paid / GDP), where k is a constant Putting in the CBO's definition of effective rate, this becomes (taxes_paid / household_income ) = k * (taxes_paid / GDP) which becomes (household_income / GDP) = (1/k), where (1/k) is a constant Hence, it would appear that household income as a percentage of GDP has remained relatively constant since 1980. This is verified by the following graph: The actual numbers and sources are at http://www.econdataus.com/inctax04.html . As can be seen, personal income as a percent of GDP has been relatively stable since 1950 (especially since 1980). If you lower the rates on one part of that income, it would seem that you would have to raise rates on another part of the income or change the amount of pers...

On May 20th, the Wall Street Journal ran an editorial titled "You Can't Soak the Rich" . The article recalls that Kurt Hauser, a San Francisco investment economist, had stated on "this page" in 1993 that "No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP." As evidence of this, a chart is included which shows federal tax revenue and the top marginal rate from 1950 to 2007. Based on the this chart, the article goes on to state: The data show that the tax yield has been independent of marginal tax rates over this period, but tax revenue is directly proportional to GDP. So if we want to increase tax revenue, we need to increase GDP. In fact, this editorial is very reminiscent of one than ran less than a month ago titled "Obama's Tax Evasion" . Both supported the proposition that tax cuts can increase revenue and both included a chart showing the relationship between two variables....