Tax revenues don’t lie—nobody pays extra taxes just to make the economy look better. From Ryan McMaken at mises.org:
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:
There have been some periods where revenues went slightly negative without an accompanying recession. But not in many decades do we see a situation where year-over-year revenue has fallen to the extent that it has fallen in recent months, without a recession following soon after. (For example, federal revenue dropped 26 percent, year over year, in April of this year, followed by a 21-percent drop in May.)
Most of the corporate media’s declarations of excellent economic conditions look no further than the trailing indicator of employment or consumer spending. Consumer spending, of course, continues to be fueled by rising debt levels while investment falls.
