The US federal #fiscal #deficit decline by a record $1.4 trillion for the 12 months ending September 30. This is what the latest monthly #Treasury statement claims. But is that true? Let’s dig in.

For a start, the September deficit went up almost by factor of 7. Partially due to debt limit theatre a year ago:

The good news: individual income taxes are still strong, still growing by around 30% y/y:

Corporate income taxes rose to a new record on a 12-months basis, but growth has all but stalled. Note how corporations do not pay much more than at the peak in 2007, while income taxes paid by individuals roughly doubled.

Federal receipts (= revenues) have plateaued, but outlays (= spending) has seen a fresh spike:

The deficit hence took a turn for the worse. For the last 12 months it amounted to $1.38 trillion, exceeding the budget of $1.03 trillion substantially:

And yes, the ‘official’ deficit has shrunk from $2.77 trillion to $1.37 trillion (a reduction of $1.4 trillion). However, when calculating the deficit from the change in debt outstanding, the number rose to $2.45 trillion, a 65% increase from the level a year ago:

CONCLUSION: The ‘actual’ deficit is usually higher than the ‘official’ number. This is due to some “off-budget” items. The debt ceiling discussion in 2021 led to some distortions, but the ‘healing’ trend in the deficit seems to have come to a stop. The deficit is bound to grow as tax receipts suffer from economic slowdown or an outright recession. Interest expenses, now at $475 billion, have already increase by one third from the level a year ago ($352 billion). Almost 80% of all federal debt outstanding comes due in less than 12 months. As debt sold during times of low interest rates matures, recent increases in interest rates will quickly eat their way into the federal budget.