October 2013 Cash Deficit

The US Daily Cash Deficit for 10/31/2013 was $7.9B bringing the October 2013 cash deficit to $87B for the month. There is no doubt that this is a material improvement over last year’s $123B deficit, but as discussed in the October preview where I forecasted $91B, it was not exactly  unexpected.

10-31-2013 USDD

Revenues ended up at $223B just shy of my $225B forecast despite about $4B of help from what I assume to be delayed tax refunds. It was still a good number though, representing a 9.5% YOY increase which is pretty close to what we’ve come to expect in 2013.

Outlays ended up at $310B, a $17B decrease over 2012, though about $5B of that was due to timing. The rest…I still have to believe much of it is simply delays in payment and expenditures caused by the 16 day government shutdown. We saw some catch up in the last week, but absent timing issues, we normally expect to see pretty flat outlays…with increases in entitlements being more or less offset by sequestration cuts elsewhere in the budget. I could be wrong….If November is down big as well, that hypothesis may need to be discarded.

As a whole…October was a good month in what has without a doubt been a good year. Revenues up, outlays down….that’s a pretty simple formula for success and honestly I expect more of the same for the remaining two months of 2013. But 2014 will bring us into new territory. Creating a one year blip is not exactly rocket science. Raise taxes…hold spending flat…which is exactly what has happened. Through 10 months 2013 revenues are up a thoroughly impressive 14% and outlays are down 1%.

But come 2014…there are no new tax increases on the horizon…, and Obamacare is poised to wreck havoc on both sides of the ledger…depending on how they decide to account for it. For example…the Obamacare subsidies are technically tax rebates…which I generally treat as “negative revenue”. However…they will be paid directly to insurance companies….so I really have no idea how they will be reported on the DTS…if at all. Penalties, which would show up as new revenues are minimal, and from what I can tell wouldn’t be paid until April 2015 anyway…. then there is the expansion of Medicaid…which I would expect to show up in January 2014…adding billions per month of outlays to that program. All in…it’s a lot of moving pieces which makes it extremely difficult to forecast what will happen…..guess we’ll know in a few months.

What I suspect is that after topping out in 2009 at $1.6T…4 straight years of material improvement end in 2013 at about a ~$700B annual deficit(which is still absolutely terrible by the way). From there…it will stabilize for a year or two before shooting to the moon by the end of the decade.

Failure: The Only Option??

I read The Queen of Obamaland by Pat Buchanan with great interest as he turned his guns on HHS Kathleen Sebelius who’s disastrous rollout of the Obamacare website has caught the attention of many late night comedians. It’s worth a full read….just like everything Pat writes, but here’s the money quote:

In World War II, FDR brought together the men who made things in America,  dollar-a-year industrialists who swiftly took charge and met his immediate  demand for 50,000 planes and 1,600 ships.

They built the most awesome military machine the world had ever seen, arming  12 million Americans, Russia and England as well, and smashing two mighty  empires on opposite sides of the world.

And these men did it in about as long a time as it took Barack Obama’s  regime, captained by Kathleen Sebelius, to flunk a test to create a website.  There is something deeply wrong with our republic.

Doesn’t he have a point? Now…I knew that our government sucked at just about everything it touched….but have we sunk this low…we can’t even build a stinking website…even after spending $600M+. And this is likely just the tip of the iceberg….we know damn well that whatever cost estimates and savings they promised to justify this whole thing will turn out to be disastrously wrong as well.

This is one (of many:)) fundamental reasons I could never be a liberal. You see, the liberals for the most part have their hearts in the right place. They want to eliminate poverty, educate everybody,  make sure everyone has healthcare….essentially just make the world a better place, and I get that. But then…they go completely off course by making a fundamental assumption….that Governmentt has the capacity to accomplish any of these things. It can’t….and it has a documented record of failure in just about everything it touches. And yet…the liberals just can’t give it up. After his failure…nobody on earth would trust Bernie Madoff today with their retirement accounts today….but here are the liberals….”please Uncle Sam…we have this great idea on how to fix healthcare”…”can you take it from  here?”

And it’s not like the Rebublicans are any better….what with the nation building and the department of homeland security ect…

On the same vein of thought…on Meet The Press Sunday, Alex Castellanos-republican strategist made a good point…asking…”name something government can do well”….then went on to name a list of failures…including pointing out that social security was a ponzi scheme…excellent…truth telling on national TV…that never happens.

Enter Neera Tanden-Democrat…who  giddily declared after this bit of truth telling..” I think it’s good to know my republican colleagues don’t like social security and medicare”. That’s it….that’s the only thing she heard.  Hee hee… now i get to bash republicans…for telling the truth. I watched it about five times…and you could see the sparkle in her eye the second the truth slipped out of Alex’s mouth…it kinda made me sick to my stomach.

And you know what…it will work. All you have to do is accuse a candidate of wanting to cut back…even a tiny % of the SS Ponzi scheme…and 60M+ voters will crush whatever political aspirations they may have had….even if they were the best candidate with the best ideas for the long term.

And this truth….more so than anything else…including the $17T of accumulated debt is why I remain convinced that the collapse of this system is inevitable. I will grant the optimists out there that we are not too far gone to fix this country….solutions exist to put us back on the right track to long term prosperity. However….none of them will ever see the light of day…and it’s our own damn fault. For 30 years we as a society have been making piss poor decisions at the ballot boxes, and the result is profound. The country that not so long ago…as Pat said:

“built the most awesome military machine the world had ever seen, arming  12 million Americans, Russia and England as well, and smashing two mighty  empires on opposite sides of the world.”

…is now so friggin incompetent they can’t even build a damn website. In the movie Idiocracy it took 500 years for society to devolve….I’m thinking for us…50 would be a miracle. Democracy…it seems, is simply incapable of fixing this. Thus failure, it would appear is…the only option. With collapse comes the opportunity to rebuild from scratch. Ctrl-Alt-Del


October 2013 Update : Social Security-Annual Change In Enrollment

The October 2013 Social Security recipients report was released today showing a monthly increase of 110k people with an average monthly benefit of $1,163…up $1 over September. We continue to see a gradual slowdown…with 20k fewer new enrollments than last October’s 130k increase. The TTM delta is now at 1.227M, so averaging right at 100k per month, though there are large seasonal variations (which is why we look at the TTM).

For reference, we peaked at a TTM rate of 1.624M almost 4 years ago in 12/2009 and have been trending down since then. Still…1.227 is still very high historically. Looking back 10 years to 2013, the rate was under 600k. The course from here will be a very important factor in how quickly the budget deficit deteriorates over the next 5-10 years. On the positive side, though high, the rate is still trending down, and there is a good chance that a lot of the people you would have expected to be retiring now or soon actually already did….causing the 2009 spike…and the subsequent dip.

On the other side, we are still working through the left tail of the boomer  population distribution. I have a table published in 2011 that shows the US population by age. As of 2011, there were 2.7M of living Americans born in 1948….who would be turning 65 this year. Contrast that to those born in 1949 at 3.7M. Not sure what they put in the water that year, but roughly 1M more Americans will turn 65 in 2014 than in 2013. From here, we have a steady increase until 2028 when 4.6M born in 1963 will turn 65. Obviously that’s based on the 2011 snapshot and not adjusted for mortality. And while currently, people become eligible for Medicaid at 65, they can apply for SS anytime between 62 and 70…with the benefits growing the longer they wait.

So the main thing I am looking for with this data series is a bottom in the TTM rate and for the trend to turn back up. October 2013 was not that month. I don’t know if it happens next year, or five years from now, but when it does lookout because it’s going to get ugly(er).


US Daily Cash Deficit 10/21/2013

The US Daily Cash Surplus for Monday 10/21/2013 was $5.4B bringing the October 2013 cash deficit to $53B with 8 business days remaining in the month.

10-21-2013 USDD

Revenues continue to gain at about $1B per day…now at +8B for the month. Outlays have yet to recover from the shutdown, which I suppose is understandable. The government has only been reopened for 3 business days….I know if I ever got a 2+ week vacation, it would take me a while to catch back up. Still….no sign of a pickup yet….I’ll keep looking. Tax refunds are another category that is down. No individual tax refunds have gone out since $25M on 10/8 almost 2 weeks ago. The result is that YOY, we are down $3B in that category all else equal.

All this adds up to an apparent $40B improvement, which would certainly be a good number…if it can hold up. As I’ve said before, it looks like at least ~$20B of outlays went unpaid during the shutdown, including salaries. With back pay being part of the agreement, I would expect us to catch back up to most of that, but I simply haven’t seen it yet.

Obamacare Economics

Andrea Mitchell was on Meet The Press this weekend and managed to speak a bit of truth with this quote:

“They need the healthy people to be enrolled in order for the economics of it to work”

So…take a pool of 100 healthy single 23 year old men.  If you are an actuary….what is the expected medical costs for this pool over the next 12 months? We know there won’t be any pregnancies, and there probably won’t be any cancer, arthritis, or osteoporosis. Maybe one guy will have a serious ATV accident, a few colds, and a handful of STD’s. With a moderate deductible, lets just say the expected insurable costs add up to $75k, plus $15k profit/admin cost for $90k total…or $75 per month per guy….to insure against being bankrupted should something terrible happen….like a car crash, cancer ect…

The entire premise of Obamacare is to attempt to slip…into this pool of young and healthy….the really sick. So now we take 10 guys out of our population and replace them with 10 chronically ill people, each requiring $50k per year of medical services. So now, instead of being able to insure himself against unlikely, but catastrophic events for $75 per month….our 90 young men have to pay $500 per month instead. Now…for the 10 chronically ill people…this is a really good deal. They can go it alone and pay $4200 per month….or sign up for Obamacare and pay $500…or less. But as you can see…this is a screw-job for our young males…..who are being forced by law to subsidize the sick population.

And that’s how the game works….just like social security and medicare…..the old and powerful using the legislative process to benefit themselves and screw over the young. The fear is….that only sick people will sign up for Obamacare…which is why there is a penalty…to attempt to force the young and healthy…who would otherwise look at the $500 per month payment and decide…correctly….that the insurance risk/reward simply didn’t pencil out for them and decline. However….at least in the first year, the penalties are minimal…as low as $95, and grow to$695 by 2016. So what is likely to happen…especially in year one is rather than getting a pool of 90 23 year old healthy males and 10 sick folks…you get almost all sick folks. In that case….somebody, either the insurance company, or probably the federal government ends up losing a ton of money, and in year two….rates go up accordingly.

I have a better idea….personal responsibility. First…we take down all of the medical monopolies that allow Dr. McDreamy to jack up his prices 500%. This should collapse prices down to a point where you can afford to pay cash for essentially all of your routine care. Sure….it will mean no more Lamborghinis for McDreamy, and he’ll have to get rid of 90% of the hot secretaries he keeps on the payroll, but I’m ok with that.  You will still have a catastrophic insurance policy that will cover car crashes and other random events you have little personal control over. But…50 and need a $2M heart transplant because you weigh 450 lbs….tough crap. You can sell your BMW and offer McDreamy $50k cash…take it or leave it….I suspect he’ll take it. Dying of cancer because you smoked 3 packs of cigarettes per day for the last 3 decades??….That sucks, but sorry….you can’t force society…or your insurance pool to pay for the consequences of your personal decisions.

The entire medical establishment has gotten fat and rich by offering services at outrageous prices nobody would voluntarily pay. They have managed to pull it off by working with government, big business, and the insurance industry to create and promote the screwed up system we currently have…. Obamacare just builds onto and solidifies an already screwed up system….it solves nothing and attempts to screw over the young in the process. The only thing that will work is to destroy the current system, and make people responsible for their own decisions. I’m willing to bet….as a result…they start making better decisions. I think it will work….that’s how much faith I have in mankind….