Another example of the “it’s on the Internet so it must be true” fail: Zero Hedge

The comments on the FM website are littered with folks — probably smart, well-educated people — parroting nonsense they picked up on the Internet.  We need to be more careful — and hold websites responsible for the information they post.  Today’s example is Zero Hedge, a fun website posting interesting but often misleading information.  Such as this:  “US More Bankrupt Than Ever – $83 Billion April Deficit Is Record For The Month, $30 Billion Worse Than Expected As Tax Receipts Plunge“, Zero Hedge, 12 May 2010:

Well, if nothing else, we now know officially just how great those tax receipts were. Good thing too – we can end that whole superficial tax receipt debate and focus on important things. April’s tax deficit of $83 billion was the highest April deficit on record. America is now more bankrupt than ever. Income was $245.3 billion, 8% below the total recorded last April. Spending was $328.0 billion, up 14% year-over-year. A year ago in April the deficit was $20.9 billion. And here is the data: tax receipts down 7.9% YoY, Individual Income Tax down 21.5% YoY, and more importantly, spending: Total spending up 14.2%, National defense up 17%, Medicare up 39.4%, Social Security up 4.2% and General Government up 5.6%. At least interest payments were down 9.5%.

And now back to your regularly scheduled bankrupt country market melt up.

Classic Zero Hedge.  Technically accurate, grossly misleading.  Like their most frequent fail, writing with great excitement about not-seasonally adjusted data that is boringly typical when properly adjusted for predictable seasonal patterns.  But in early 21st  America, reliability and accuracy doesn’t generate the kind of traffic that’s brought ZH fame and fortune!  Fortunately we like to be ignorant, and on the Internet we’ll find people to help keep us ignorant.

The truth is out there.  If we want it.


Government income and expenditures have large monthly fluctuations, which make year to year comparisons almost useless.  As we see here.   The year-to-date numbers are what we typically see in the early stages of a recovery.  Comparing the first 4 months of 2010 with 2009 shows a far more pleasant picture than painted by Zero Hedge.

  • Receipts up 0.4%
  • Outlays down 4.7%
  • Deficit down 12.4%

Why the dismal April numbers?

CBO’s Monthly Budget Review of 7 May gives a full explanation.  Receipts based on 2009 income were low; receipts based on 2010 income are rising.  And there were timing factors boost 2010 spending vs. last years.

  • By CBO’s estimate, receipts in April were about $20 billion (or 8 percent) less than receipts in April 2009. That decline is largely related to individuals’ tax liabilities for 2009.
  • … Withheld income and payroll taxes rose by about $6 billion (or 5 percent) relative to receipts last April; most of that change reflects recent growth in wages and salaries. Net corporate income tax receipts were about $8 billion (or 56% ) higher than those in April 2009.
  • … Outlays were $44 billion (or 15 percent) higher in April 2010 than they were in April 2009. Certain payments were shifted into April this year because May 1 fell on a weekend, boosting outlays in April by $25 billion; there were no such shifts in the same month a year ago. Adjusted for that calendar effect, spending was about $19 billion higher this April than it was in April 2009.

What were the timing issues?  April’s Monthly Treasury Statement spells it out in big type at the top of the report.

Military active duty pay, veterans’ benefits, supplemental security income payments, and Medicare payments to health maintenance organizations for May 1, 2010 were accelerated to April 30, 2010.

For more information

See the Treasury’s Financial Management Service for more information.  Here is the monthly totals for money and out back to 1980:  PDF or Excel.


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