The US Daily Cash Deficit for 4/10/2013 was $9.5B bringing the April Deficit through 10 days to $73B. We do see tax deposits continue to edge up, now about 6% over last year, but net revenues are only up 3%. Not that it matters in the big picture, but it is worth noting that 4/2013 will have one more business day than 2012, which should help revenue a bit at the end, but hurt cost. There is one promising metric…Taxes not withheld from paychecks…for example taxes due paid by check (because you didn’t withhold enough) are up 17% compared to last year, good for $2B. It’s not much in the big picture, but if we extrapolate it, it could mean some big revenue gains next week… or it could mean nothing at all.
It seems that the Republicans have just come out with a great new plan to balance the budget in 10 years…. That’s great…I mean, why hasn’t anybody thought of this before…am I right? You can find it here. I haven’t read it all, and don’t plan too, but I did take a look at the CBO summary table, and compared it to the CBO’s own forecast released a few weeks ago, and my own forecast, which I have been working on , but not released…yet.
First, I need to provide some background about the poor bastards at the CBO (Congressional Budget Office). You might think that the CBO’s job is to create realistic models that forecast future revenues and outlay’s… you would be wrong…at least on the realistic part. You see, congress comes to them, and says…build a model…but use this list of ridiculous assumptions guaranteed to get to the numbers I want. The truth is any jackass can plug some numbers into a spreadsheet and squeeze the assumptions to force fit whatever output he wants, but that’s not called forecasting, it’s just called fiction.
The first thing that jumps out of both the CBO’s forecast, and the “Path to Prosperity” forecast is that the revenue numbers are completely bogus. For some reference, let’s take a trip down memory lane to 2003. If I know that 2002 had $1.89T of revenues….what would have I forecasted revenues 10 years out to be in 2012? To nail it, I would have needed to forecast revenue growth just a little bit under 4% per year, ending 2012 at $2.755T $865B higher. From 2002 to 2012, revenues grew by about 46%
Now, sitting in 2013, what do you think would be a good estimate for 2022 revenues knowing that 2012 was $2.755T? Paul Ryan’s plan predicts 88% growth…the CBO’s baseline forecast has it at over 93%. For some reason, they think that government revenues will grow at over twice the rate in the next 10 years as they did in the last 10? Are they optimists? Or are they just full of it? My own analysis…and realize this is one guy with a few hours a week, an ornery computer, and a ruler…I put it at 53%, and that rather than the budget being balanced in 10 years, will be pushing close to a $2T annual deficit.
On the cost side, from 2002 to 2012, outlays grew 75%. Per the Ryan plan…2012 to 2022 will only grow by 35%…despite what are sure to be massive increases in entitlements. I put it at 59%. The Ryan plan has federal outlays in 2022 at $4.888T. The CBO baseline has it $800B higher at $5.691T. I have it at $6.115T. So I guess this is a step in the right direction…but I don’t see it happening. The sequester was an $85B reduction in spending, and people had fits. The only way $1.2T of annual cuts happens is when the money runs out, which is almost certain to happen before 2022 anyway.
Look, I like Paul Ryan because he seems to be the only guy trying, and the only guy who has tried at all in the last 15 years to address this issue. But coming up with a grand plan…and using a ton of bogus, or at least unlikely assumptions to hit your number…that’s the game that got us here in the first place.
As for results…We all know that little to nothing will come of this. You can’t start negotiations with the President by presenting a budget where the first assumption is to repeal Obamacare…tomorrow… Really?? That’s even more asinine than the revenue growth assumptions Regardless of what you think about Obamacare, the truth is, it’s going to be here until at least 2016, and probably a lot longer than that. If my math is correct, by 11/2016, debt is at $21T, and the deficit is starting to accelerate. I’m not sure we make it that far anyway, but anything is possible…well..except this budget proposal ever becoming relevant.
Note to Paul Ryan…or President Obama for that matter…if you want/need a competent excel jockey…fire your guy and give me a call….but I’m going to need to work from home 🙂