Federal deficits continue to spiral upward, but deficits aren't just a function of federal spending. Deficits aren't necessary if tax revenues increase to match spending. But that's certainly not where we find ourselves in 2023. Rather, federal spending is rising even as federal revenues have fallen, year over year, for ten of the last twelve months. Moreover, on a quarterly basis, federal receipts have been falling—quarter-to-quarter—since the third quarter of 2022.
It's long been known that there's a pretty strong correlation between falling tax revenues and worsening economic conditions. Yet, even as tax revenues are falling, we're being repeatedly told that the American economy is in great shape and there's no recession in sight.
Yet, if we take a historical view, we can see how declining federal revenues have clearly coincided with recessions going back at least 40 years:
The fact tax revenues are weak and falling should not shock us if we're actually paying attention, however. Real wages are lower now than they were in January 2020, before the beginning of the covid recession. Looking at CPI-adjusted average hourly wages, wages increased a whopping two cents from September 2022 to September 2023. Wages are down by .06 percent since January 2020 before the lockdowns. In other words, real wages have gone nowhere in years.
There may be a multitude of other factors as well, of course, but no matter what the specifics are, it's difficult to deny that falling or weak tax revenues contradict narratives telling us how strong the economy is. Moreover, consumer spending as we now see it is also coinciding with a surge in corporate bankruptcies, a falling saving rate, and mounting consumer debt. The index of leading indicators is in recession territory. The inverted yield curve points to recession, and money-supply growth has crashed to its lowest levels since the Great Depression. Who would be surprised that tax revenues fail to impress? Only mainstream journalists and establishment economists.