Daily US Deficit For 1/11/2013

The US Daily Surplus for 1/11/2013 was $0.7B bringing the total deficit through 11 days to $47B, $4B under 2012. At this point, there are no statistically significant trends, in fact, adjusted for working days, 2013 is pretty much spot on with 2012. Due to the way the weekends and the MLK holiday falls  in 2012 vs 2013, it’s going to take another week or two before we have a good idea where Jan-2013 is going to land. Further complicating it all, as discussed in an earlier post, Tax refunds are going to be delayed by a week, which will likely push about $5-10B of deficit out of January and into February. Ignoring any debt limit issues, there could be reduced refunds in February as well, but that’s more difficult to model so we’ll just have to wait and see.

2013-01-11 USDD

2012 Tax Refunds Delayed by 8 Days

Well, it’s official. the IRS has delayed the opening of tax season by 8 days from 1/22 to 1/30 due to the late fiscal cliff deal. I don’t know about broader economic effects from the 8 day delay, but if nothing else, this will likely give us a one week delay in the debt limit saga. Now…for the record…February is just about the worst month you could pick to have a debt limit fight…or best I suppose depending on which side you are on, since tax refunds make it the absolute worst month of the year.

For a few weeks now, my needle on the “Debt Limit Cushion” has barely budged…pointing to 2/1 as the imminent default date…maybe a few days later. Treasury, on the other hand came out and said 2/15. Last year, between 2/2 and 2/15, the government ran a $141B deficit…I just couldn’t understand how we were that far off….but they likely knew about the delay far in advance…heck maybe they even encouraged the delay for extra time. In any case, I can buy 2/15 now…+/- 3 days.

From a monthly deficit perspective, I’m not quite sure how to model this. After all, I almost never have the tax documents I need to file until early Feb. anyway. So if I file the same time I always do, will processing time be the same? Is there excess capacity to process claims, or is there a queue…and I will be pushed back 8 days due to the delay? Since 99% of everything is automated, I wouldn’t really expect a full 8 day delay, but this is our government, so why wouldn’t it be?

The January effect is a bit more certain. Those early filers received about $7B of refunds in late Jan-2012….we can probably expect most of that to get pushed into Feb., lets just say $5B. Not much in the big picture.

February could go either way. In 2012, $129B of refunds went out in Feb., $60B in the last 8 days. If there is a linear delay….expect a material change in February. If the delay is not linear, and the IRS has the capacity to process most of the delayed returns in early Feb, there could be little to no change. All that is left to do now is sit back and watch….and of course hope Treasury even has the cash to pay us: Increase Debt Limit or Tax Refunds Will Not Go Out

Uncle Madoff Sam’s “Social SecurityTrust Fund” – How a nation of suckers fell for the oldest trick in the book

Bernie Madoff Sr. 1935 (BM) : Ok everybody step right up. Have I got a deal for you today!! All you have to do is give me 15% of your paycheck from the day you turn 18 until the day you turn 62, 65, 67, 70?? In exchange for this modest contribution, I will, at my sole discretion, give you a meager monthly benefit until the day you die.
(Kid): What if I die at 60…do my heirs get anything? Can I take out a 401k loan against it?
(BM): No and No.
(Kid): Ok…it’s 1935 and life expectancy is only 58. Are you sure this is a good deal?
(BM): Oh yes…absolutely. I’ll post a spreadsheet on Facebook that proves it out.
(Kid): Well…what will you do with my money for the next 50 years until I need it?
(BM): Well, I’ll probably lend it to the government, who will spend it on a lot of stupid things, but don’t worry, I will be sure to get the IOU’s notarized. 
(Kid): But congress is just a bunch of no good crooks and thieves. I wouldn’t trust a congressman as far as I could throw him…
                Ok…enough fun. It never ceases to amaze me that we as a nation trust our government, run by universally despised politicians with our personal wellbeing in retirement. You would probably think pretty hard before letting your brother in law borrow $1k so he can make his mortgage this month, but if you are an average worker, making $50k per year, you are sending uncle Sam right about $7500 per year (15%) for this promise, that just about all of us know is BS. What could the average worker do with an additional $625 per month, $1250 if you are a couple? Pay off their house in 10 years? Pay cash for a car instead of financing? Maybe…just maybe fund their own darn retirement?
                Let’s take that average worker, and assume that over his career, his average annual salary is $50k, and that over his 49 year career (18-67) he thus pays in $367k. Furthermore, we are going to just ignore compound growth ect….we are just going to assume that investment return equals inflation…ie if inflation is 3% in a given year, then investment returns are 3%. Regardless of the real number, this employee gets to 67 with an equivalent of $368k in the bank. It’s not a huge nut, to be sure….the average retiree gets about $15k per year from Social Security…so again assuming no real returns, this nut will last 24 years, to the ripe old age of 91. After that…he has to move in with his kids, grandkids, or great grandkids. We should all be so lucky right?
                So this begs the question. If a worker could simply keep that 15% of his paycheck and hide it under his mattress getting no returns for 49 years, and still be better off than he would with social security…why the heck does this program exist? It’s quite simple really…social security isn’t a retirement program…it’s a Ponzi scheme now, and it always has been. Rewind back to 1935. You have a depression going on, the electorate is already a little pissed, and FDR needs money to pay for his programs. Enter Bernie Madoff Sr. (yes..I’m joking)
“Hey Mr. President… I have an idea. The electorate will never go for a new tax…in fact they would probably roast us alive. So instead of calling it a tax, we’ll just change the name and put a bow on it. Those dummies will lap it up. We’ll create a “retirement” program (as he does air quotes) and call it social security. Everybody will have to pay into it, so we get a steady revenue stream to spend on whatever we want.  Best of all, most of these saps will die long before we have to pay them anything. Sure, it will blow up in the end, but we’ll be long dead by then.”
That’s how I imagine it happened. I could be wrong.
                So here we are, 77 years later, and the little Ponzi scheme that could is still chugging along, if not as gracefully as before. No longer much of a cash contributor to the federal coffers, Social security is teetering the other way with a mountain of fake IOU’s ready to be cashed by the senior voting bloc. And now….decision time. When Bernie Madoff’s Ponzi scheme was exposed, some victims lost everything. While we can feel sorry for them, this is how it should be. Imagine the outrage if instead of letting these poor fools suffer, instead the federal government made them whole, and to pay for it, added another line item to your paycheck. $5 a week for the Bernie Madoff Victim’s fund. No Thanks!!. I wasn’t foolish enough to invest in a Ponzi scheme, Why should I pay for your mistakes?
                Except….with Social Security, we are all victims. We all got screwed…if you will, and it continues to this day. The only moral solution to this massive injustice is to shut the whole thing down. Why should our youth, or even anyone under 50 pay another nickel into this injustice? Those most responsible for this situation are today’s retirees. They bought the scam hook line and sinker decades ago and kept electing the clowns in congress who perpetuated the scam. Let’s just call it what it really has become. In addition to its Ponzi roots, Social security is just a huge welfare program where the wealthy and powerful elderly voting block essentially robs their children and grandchildren on a monthly basis. If my grandparents can’t make it without their government cheese, I’d be happy to take care of them myself, and I’d bet you would too. Sure…there will be some without family, but I bet it’s a small portion. With all that extra money flowing into workers pockets instead of being lost in the Ponzi scheme, who knows…maybe worthy charities will see an uptick in donations.
                But alas…what should happen is rarely what does happen. Instead, the Ponzi will just go on, and the deal will get worse and worse.

Daily US Deficit For 1/10/2013

The US Daily Deficit for 1/10/2013 was $5.2B bringing the monthly total to $48B, $6B ahead of 2012 through 10 days. It is still too early to know much at this point in the month, but both revenues and outlays pacing ahead of last year. Timing issues abound, but are primarily contained within the month. Yesterday I took a wild guess on the reason for an upcoming revenue spike mid month we have seen in the past two years. After glancing at the calendar, it occured to me that it could be related to the upcoming Martin Luther King Holiday. The holiday is on Monday, so it seems possible that you could get two days of revenue in one, creating the appearance of a spike. I’m not completely convinced this is the sole reason…the Jan. spike appears a little larger in magnitude that what we see the Tuesday after Memorial Day or Labor Day… MLK day is a little later in the month than last year, which should provide the data we need to determine the true cause. The “Debt Limit Cushion” is currently at $43B, still on track to be exhausted early Feb…in fact I’d put at 2/1, a Friday which should have heavier than usual outlays. due to the way the weekend falls. That is a mere 3 weeks away, and I have barely heard a peep from congress on this, so it could go down to the wire.2013-01-10 USDD

Daily US Deficit For 1/9/2013

The US Daily Deficit for 1/9/2013 was $10B primarily due to $11.5B of social security payments made yesterday. Social Security payments of around $58B per month  go out in four monthly batches.  The first goes out on the third of the month…usually about $25B. The next three batches go out on the 2nd, 3rd, and 4th Wednesday’s of the month and are around $11B each. This timing issue makes comparing year on year numbers throughout the month a little tricky. For example…in 2012, the second Wednesday of the month was 1/11, compared to 1/9 this year. Looking at the charts below, you can see that January 2013 outlays are a full $18B ahead of 2012 through 9 days, which is a pretty big increase. However, around $10B of that is due to SS timing. Revenue continues to pace ahead of 2012 and cost is a bit ahead, even after adjusting some for timing. All in all, through 9 days everything is looking pretty much in line with last year with increased revenues being offset by increased cost.

I don’t expect a lot of excitement for the remainder of the month deficit wise, but there will be a large surplus….maybe next Tuesday. I’m not exactly sure what it is, but it is related to income tax witholding…wild guess is that for some entities, taxes withheld from paychecks are sent in on a specific date a few weeks after a quarter closes??  Whatever it is, expect a spike in revenues on that day of around $15-20B.

The “Debt Limit Cushion” is at $47.4B, and shrinking roughly at the expected pace. Using last year as a guide, we only get to 2/3, not 2/15 like the last projection I saw…I will reiterate that I do not have enough data to accurately model “Extrordinary Measures” but last year, the cash deficit between 2/1 and 2/15 was $174B. Need I point out that we currently have $47B in hand, and three weeks left in January? I will continue to keep my eye out though….what I expect to see is a substantial reduction in imaginary “Intragovernmental” debt, currently at 4.856T, offset entirely by an increase in external debt exchanged for cash. Effectively what they would do is push that debt off balance sheet, ignore it, and then issue new debt for cash, technically staying under the limit. Just a little bit shady, but nothing in comparison to the “Trillion Dollar Coin”…don’t get me started.2013-01-09 USDD