The Sweet Showers of April
When April with his showers sweet
The drought of March hath pierced to the root
– The Canterbury Tales, Geoffrey Chaucer
The federal government took in $850 billion dollars in April, almost double its monthly average for the rest of the year. Washington’s coffers were swelled by an extra large slug of income tax revenue from 1040’s, along with elevated estimated payments and corporate income tax receipts to add to the usual withholding tax flows. This gush of money resulted in a $250 billion surplus and brought the annual deficit down to just over a trillion dollars. This April’s record inflows were 10% higher than last year.
But despite April’s fabulous revenue, the federal government’s annual budget pictures has changed very little. All of the talk of efficiency and layoffs and tariff revenues has produced no substantive improvement in federal finances. Washington is still projected to run almost a $2 trillion deficit this fiscal year and no one inside or outside the halls of power even bothers to suggest that it will ever be less.
The new tax bill which is slowly working its way through Congress will most likely extend the expiring provisions of the 2017 tax bill with a few extra goodies thrown in, and whatever spending cuts are made in science and general welfare will be transferred to defense and security. It does seem as though the bond market has finally cottoned on to the permanence of $2 trillion deficits and has begun clearing its throat, but for the foreseeable future the deficit trajectory remains as before, although the winners and losers from fiscal policy will not.
While Washington’s revenues are lumpy, its expenditures are not. The vast bulk of federal payments are essentially periodic, with outflows currently running at around $600 billion per month, with modest fluctuations for interest payments on the debt and income tax refunds. The surplus of April will be gone by the end of May, and so we begin a summer slog towards yet another debt ceiling deadline. Unlike Chaucer’s England, the showers of April do not pierce the deficit droughts to the root.
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