Treasury Runs Budget Deficit of $128.7 Billion In August

The federal government ran a budget deficit of $128.7 billion during the month of August. This compares with a $147.9 billion deficit in August of 2013.

Treasury Activity

Receipts for the month totaled $194.2 billion, up from $185.4 billion a year earlier. Total outlays were $323.0 billion from $333.3 billion a year earlier.

The rolling 12-month U.S. government budget deficit through August was $515.1 billion, an improvement from $534.3 billion in July. The rolling 12-month budget balance as a percentage of gross domestic product is -2.98%.

Treasury Budget Balance

Structural Economic Reform And Financial Markets

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In late 2008, financial stress became widespread and perceptions of risk hit new highs. Concerns related to contagion among countries also had an increasing effect on premiums and increased the financing cost for many economies. The response to this problem was austerity – to stress the importance of getting the fiscal situation, and thereby the levels of debt of those countries with this problem, under control.

The returns to that effort, however, remain obscure. For example, some countries with increasingly large debt-to-GDP ratios benefit from historically low risk premiums, while several countries that applied radical measures to reduce their public debt still have to finance their debt at very high interest rates. France, for example, has a public-debt-to-GDP ratio that is expected to reach 91.8% in 2014. In July 2014, the country raised nearly €3.4 billion in ten-year bonds at the historically low rate of 1.77%.

Structural reform lowers country risk

One-Time Contributions To GDP

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GDP measures the new products or services provided in a specific window of time (e.g. the 3rd quarter of 2014, or all of 2013). If all the effort in producing a new product comes in development, but it is then copied for free, this means that there is a one-time contribution to GDP in the year it was developed, and then nothing afterwards.

Things like refrigerators, Diet Coke, and cars contribute to GDP every period because we have to make new versions of them over and over again. But in one sense that is a bug, not a feature. Imagine if, having invented Diet Coke, you could make copies for free. That would lower GDP, as Coca-Cola would drop to essentially zero revenue from here forward. But it’s demonstrably better, right? Free Diet Coke? Where do I put in the IV line?

Dietz Vollrath, Associate Professor of Economics at the University of Houston

Treasury Runs Budget Deficit of $94.6 Billion In July

The federal government ran a budget deficit of $94.6 billion during the month of July. This compares with a $97.6 billion deficit in July of 2013.

Monthly Activity

Receipts for the month totaled $210.6 billion, up from $200.0 billion a year earlier. Total outlays were $305.2 billion from $297.6 billion a year earlier.

The rolling 12-month U.S. government budget deficit through July was $534.3 billion, an improvement from $537.3 billion in June. The rolling 12-month budget balance as a percentage of gross domestic product is -3.09%.

Treasury Statement

The Impact The U.S. Economy Has On Emerging Markets

With a nominal gross domestic product of nearly $17 trillion, the U.S. is easily the world’s largest economy. Naturally, a small change in U.S. GDP can have a lasting impact on the economies of less developed countries.

An analysis conducted by Credit Suisse shows the degree to which an increase in U.S. GDP causes GDP shifts in select emerging nations. For instance, a 1% increase in U.S. GDP leads to around a 1% increase in Russia’s GDP after one quarter and around a 3% increase after four quarters.

This suggests that Brazil, Mexico, Czech Republic, Hungary, and Turkey are all heavily reliant on a stable U.S. economy. Nations like China, India, Poland, and Indonesia, while still quite benefited by a healthy U.S., are less dependent.

US Impact