Mish often points out that state sales taxes are flat to down year over year, even though rates are up, revealing that the recovery is all smoke and mirrors. Zerohedge has been reporting the federal income tax withholding data, which tells much the same story. Basically, if the economy were really improving, people would be earning more, spending more, and paying more taxes. Government spending is not economic growth — if it were that easy, the USSR would still be around.

Here’s the latest withholding data from zerohedge: