Federal Spending and Revenue per Capita

Think of it this way

It is a household that spends more than it earns every month and covers the difference with a credit card. As long as the card keeps being renewed, it works.

What is Federal Spending and Revenue per Capita?

How much the federal government spends and collects each month, per person. It is the same accounting the Treasury publishes, divided by the population so the figures can be compared with a salary. It is shown as a twelve-month average: the raw figure swings nearly threefold within the same year because of the tax calendar, and that swing hides the only thing the series is meant to show.

How to read Federal Spending and Revenue per Capita

Two things are read: the distance between the lines, which is the deficit per person, and whether that distance ever narrows. Turn on Deficit to see it as a single figure. Spending running above revenue is the normal position, not the accident of a bad year: that is why it is called structural. It has reversed only once, between 1997 and 2002.

What Federal Spending and Revenue per Capita means for the market

The entire chain of this section starts here. A permanent deficit means permanent issuance; permanent issuance means a constant supply of bonds; and that supply has to find a buyer at whatever price. When buyers become scarce, the adjustment comes through long-term rates. It helps you understand why the Treasury cannot stop issuing, not to decide on an entry.

Where the money flows

Money leaves the Treasury toward people —payrolls, pensions, healthcare, interest— and returns through taxes. This series divides those two streams by the number of inhabitants so they can be compared with a salary. What taxes do not cover is covered by issuing debt, so the gap between the two lines is exactly what the Treasury has to place on the market each month.

What to watch in Federal Spending and Revenue per Capita

The two lines have come together only once in the entire history: between late 1997 and early 2002, revenue exceeded spending. That stretch deserves study, because it is the only proof that the gap can be closed and of what it took to close it. Compare it with the Per capita series in the US Debt chart, where that same period is the only plateau.

Spending returns to the private system what taxes had taken from it. The gap between the two lines is what must also be borrowed.