Hey everyone, it's earnings season! That means it's time to check out all the top line and bottom line quarterly results from our biggest and most important companies and predict how their stocks will perform in the coming year, right? Of course, the answer for CNBC viewers and everyone who cares about their money and the overall economy should be "yes!" But what if I told you that the #1 revenue-generating entity for last quarter and every quarter for the last several decades wasn't going to be reporting its numbers to Wall Street this week or at any time during this earnings season? What if I told you that same outfit is on a record hot streak, taking in more cash than ever before and almost spending more of it than ever before too?
No, I'm not talking about Apple, Amazon, or even Alphabet. I'm talking about the U.S. federal government. It's taking in an ever increasing amount of our tax dollars, and the numbers are staggering. But even though the revenues are so massive, and even though they have a correspondingly massive effect on the economy, the news media and even the financial news media rarely mentions these numbers at all. They certainly don't give it the same air time or ink as they do for even the smallest S&P 500 company's earnings report. That ends now.
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Let's look at the federal government as if it were a publicly held company reporting quarterly earnings. Take a deep breath and just try to contemplate it: for the first three months of fiscal 2016, Washington took in $765,645,000,000 in taxes. Yes, that's $765.6 billion and change. That's a record amount for the first quarter and 3.2% more than the year ago period. That's $255.2 billion per month. It's about eight times Bill Gates' entire net worth. And it's all been accumulated over the course of about 13 weeks. "On a roll" is a understatement here. Of course, the government is also spending at near record levels so the bottom line is still negative. In this past quarter, the deficit was more than $215.5 billion which means it's "losses per share," (or in this case, it's losses per each one of the approximately 149 million working Americans), were $1,487.
Okay, now that we've seen a wire copy-sized U.S. government earnings report for Q1 2016, let's start with the corresponding analysis: For years, conservatives and all common sense critics have focused on the bottom line when it comes to the federal government's money machine. We've been obsessed with debt and deficits, and that's understandable when the CBO projects the federal debt reaching $30 trillion in the next decade. Meanwhile, liberals and some realists have made the good point that the purpose of the federal government is surely not to turn a profit like a private company. But what no one can deny is the giant size of the revenues the U.S. government is taking in and the fact that these numbers need to be more widely reported and understood to get a better handle on our economy and our politics. Because if you aren't aware of or don't comprehend these huge money numbers, you become a likely target of political hucksterism.
Take the all the talk about corporate tax inversions as one example. President Barack Obama, Treasury Secretary Jack Lew, and a slew of business journalists have all made a special point of denouncing and trying to block these deals over the past year. One business journalist bashing the tentative Pfizer-Allergan deal late last year even made a point of talking about how much money the deal would be "depriving the U.S. Treasury of"... and he did used the word "depriving." But remember that even the biggest estimates of the tax revenue losses from all corporate tax inversions in the U.S. is $20 billion total over the next 10 years. Divide that $20 billion by 120 months and you get $166 million per month. Remember that $255.2 billion in revenues per month figure? Well, the $166 million the government may or may not be "losing" on tax inversions isn't even as big as the .2 in that $255.2 billion intake. It's almost like the fattest guy in the room demanding your cupcake, because... you know... he "needs it."
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For that matter, all pundits and politicians who talk about big business and their power have it completely backwards. An entity that sucks in a quarter trillion bucks every four weeks is more than just the elephant in the room; it is the room. If a business or industry appears to be powerful in America, it's because it has managed to gain the favor of the government and not vice versa. And when one actor in the economy is sucking in more than $3 trillion in cash every year and spending even more in the same period, every other money making and spending entity in the country is dwarfed by comparison. So we can talk about how wisely the government spends our money. But any discussion based on an argument that the government is not taking in enough of our money is ludicrous. And that ludicrous argument is pervasive in American politics and in the news media today.
This has been your federal government first quarter earnings report. Have a nice day.
