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Commentary

Nov 05
0

CBO VS CBO Update 11/5/2013

By | Commentary

Well…though it was delayed by a few weeks thanks to the shutdown, Treasury has released the September deficit numbers….capping off fiscal 2013 with a reported 75B (September)surplus. This brings the full year reported deficit to $680B…$38B higher than the $642B they forecasted back in May.

I reported the Cash Deficit for the FY earlier this month, coming in at $774B…$94B higher. So…WTH!!! When I began this CBO vs CBO piece…I unfortunately started with a bad assumption….that the Cash Deficit I was calculating would more or less tie to whatever the annual reported deficit was. I based this on two data points, FY 2011 and FY 2012. FY 2011 had a $7B difference out of a $1.304T deficit and FY 2012 had a $3B difference out of $1.092T. I figured that was close enough for government work.

Unfortunately…it turns out that these two data points for 9/2012 and 9/2013 are actually an anomaly. Historically, there appears to be a $50-$100B difference on average, though it peaked out in 9/2009 at a $402B difference. Since that was bailout mania year, I have to suspect that somehow they are/were excluding some bailout related things, but not others. Who the hell knows how/what they decided, but I think this just goes to further discredit whatever numbers they decide to publish. They are junk…to be discarded completely.

Now…this kind of defeats the purpose of the CBO vs CBO competition….if they can just make up numbers, it’s kind of a silly game right??

Well….Even if we can’t directly compare the Citizens Budget Office vs the Congressional Budget Office…we can at least look at the forecasts of each and compare it to actuals.

So first up….the Congressional Budget Office. At the time I published the initial CBO vs CBO write up, they were forecasting an 845B deficit, subsequently lowered in May to $642B. Actuals came in at $680B…so not that shabby. The initial forecast was high by $165B…and the later forecast ended up being $38B low.

Now…for the Citizens Budget Office…that would be me. My initial forecast was a 1.006T cash deficit revised down to $800B in May. Actuals ended up at $774B, so my initial forecast was $232B high and my second attempt was $26B high. Now…a  $26B miss from 5 months out….not too shabby if you ask me.

The initial miss, however, can be broken down into a few categories. Of the $232B miss, 85B was due to sequestration…I assumed incorrectly that it wouldn’t happen. Second, I did not forecast the $60B Fannie Mae Payday Loan. The rest was primarily and underestimate of revenues. I did expect higher revenues due to the tax hike (primarily on workers) but month after month they came in higher than expected in my initial forecast. That’s a good thing…unless you pay taxes I suppose.

So in conclusion, I will grudgingly give round 1 to the pros at the Congressional Budget Office. I’m not sure if they just got lucky, or if they really are better than me. But all is not lost. In the initial forecast, I framed this not as a single year competition, but as a 10 year long challenge. So…I’m working up my year two projections and should have them out in a few weeks. Round 2 coming up….may the best organization win.


Nov 04
0

October 2013 Cash Deficit

By | Commentary, Daily 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.


Oct 29
0

Failure: The Only Option??

By | Commentary

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

 

Oct 23
0

October 2013 Update : Social Security-Annual Change In Enrollment

By | Commentary

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).

 

Oct 22
0

US Daily Cash Deficit 10/21/2013

By | Commentary

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.