Journalists Don’t Know Nuthin…??

Over the years, I’ve noticed something about most financial journalists….they generally don’t know what the hell they are talking about. Case in point, today I read “The geeky debt fix that might work” by Jeanne Sahadi at CNN Money. The article is about using “Chained CPI” instead of CPI when computing the monthly increases to Social Security, government Pensions ect… Bottom line, Chained CPI typically runs a fraction of a percent under CPI. According to the article:

Social Security payments would continue to grow every year, but by 2030, the median payment would be 3% less than it would be if today’s inflation measure were used.

Got that? I thought it was a joke at first. In 17 years…2030, this switch would result in Social Security being 3% less than the current trajectory. So I went to my CBO vs CBO file, and took a look at 9/2030. Using some pretty conservative estimates (6% annual growth through 2023, then 3%), I get annual spending growing to $1.654T. The TTM right now is $689B. So if we adopt this now, we get $50B of annual savings in 2030…$4B per month. News flash…we spent about $ $25B just yesterday on Social Security, with another $35B to go this month. I’d be surprised if this train makes it to 2020, much less 2030, and yet Jeanne says:

It’s dull. It’s controversial. And it might work.

I don’t really mean to pick on Ms. Sahadi, but here is my hypothesis about 95% or so of all journalists…print/TV/radio…whatever. It all starts in college. I didn’t find a bio on Jeanne, but let me take a guess. She’s probably an English major, or a lit major, or a history, or maybe, just maybe, a real journalism major….which is probably worse by the way. Now, I’m a little prejudiced…I do not consider any of these to be real college degrees. These are the degrees you get after you flunk out of a real degree your freshman year. Just sayin… From there, if you know somebody, or have a pretty face, maybe you get on with a small media outlet and work your way up, eventually working your way up through the ranks, ultimately appearing on CNN as an “expert” Notice anything missing? Like…a real job maybe?
I can only speak specifically to accounting/finance, but the only way to really learn about business is jump in and do it….for like a decade. I learned more about accounting in my first 3 months on the job than I learned in 4 years of college.  It is quite clear that Jeanne doesn’t have a clue what she is talking about…she just skimmed through a couple government reports, pulled out some talking points, and submitted her piece to a probably even more clueless editor. If she had even the slightest comprehension of what she was talking about….none of this would have made it out of her pretty little head. But it did…and there lies the problem. Think back to 2007…of all the experts crowing about the new market high’s, and of course Bernanke starting off his 0/100 batting streak…how many people said…better watch out because the S&P 500 is going to lose half it’s value and bottom out at 666? I’m sure there were a couple, but they were few and far between. Now we have Jeanne, supposedly a financial journalist who specializes in this topic, buying (and propagating) hook line and sinker the myth that all we have to do is skim a fraction of a percent off CPI calcs and we can fix the deficit. Somebody needs to pull Jeanne out of wardrobe a few minutes early and introduce her to a spreadsheet (and maybe even a calculator)…that’s all I’m saying….can this lady even count??
So I guess my point is, you really shouldn’t trust any of the yokels in the financial media because all they are, for the most part are just entertainers who can read a teleprompter and occasionally pronounce a big word. Can you say “superlative CPI”?? Jeanne can.

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

Daily US Deficit For 1/8/2013

The US Daily Deficit for 1/8/2013 was $7.1B bringing the January Deficit through 8 days to $33B, $4B less than 2012 through 8 days. Expect another deficit in the $7-$13B range tomorrow as the next round of Social Security payments went out today.

An interesting (to me) methodology note on Social Security outlays… On the DTS, only Social Security payments made by EFT are segregated..Anything sent by check simply falls out into Other as those checks are cashed. It is a flaw in the data, but since 90-95% is paid by EFT, it’s not a huge data flaw, though admitedly one would expect that % to be slowly increasing as time goes by. However…Last year, Social Security announced that it planned on phasing out checks altogether in March of 2013. That does not appear to be a hard date, but if they are successful, it would mean that 1) the DTS would become a tad bit more accurate, with less falling through to other. 2) it would also mean that what numbers I am seeing will increase, even if everything else is equal (not that they will be), just because the % is rising. I have no no plans to adjust my data…the calculated deficit will be unchanged, it’s just that in the past, Social security outlay’s have been understated, and going forward, they will be (more) correctly stated.

Ok…moving on, below are the charts through 8 days. Revenue is still well ahead of prior years, but now cost is as well. I’d give it at least another week before timing really ceases to be an issue. Also, i adjusted the size of the new charts some…they looked a bit stretched out compared to how they looked originally in excel, hopefully this fixes them, or at least is an improvement.

 2013-01-08 USDD

Last Year’s Debt Ceiling Fight

I was watching “Meet The Press” yesterday and during David Gregory’s interview of Mitch McConnell, Gregory was hounding McConnell on whether or not he would use the debt limit as a bargaining tool over the next month. Fair enough, but one thing he kept repeating kept grating against my skull. He kept implying that the reason the US rating was downgraded after the last round was simply because the fight happened in the first place. This is ridiculous. The debt was downgraded because we as a nation have a negative cash flow of about $100B per month and no viable plan to even marginally address this problem. Gregory kept implying that if only Republicans had not made the debt limit an issue, our credit rating wouldn’t have been downgraded. Financial ignorance is nothing new, and since McConnel didn’t call him on it, it’s a pretty safe assumption they are in the same boat. Looking at the facts, it’s a wonder US debt isn’t rated as Junk.

Full Disclosure….a few years back I liquidated about $1k of savings bonds my kids had received from their grandparents for college and purchased silver dollars. I have no regrets.

2012 Cash Deficit Only $1.096 Trillion

Sorry for the delay on this one…It took a lot longer to get through the editing process at Seeking Alpha than I expected. Here’s the link.

2012 US Cash Deficit

It’s worth the trouble to get these published at SA first because it it pushes the article, and this site out to a far wider audience that it would get here alone. Also, I get paid per page view, which let’s be honest, isn’t much, but I won’t be sending it back.  So click on over and tell all your friends about it!!