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Commentary

Mar 11
0

Paul Ryan’s “Path To Prosperity” 3/11/2013

By | Commentary
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 🙂

 

Mar 06
0

US February 2013 Cash Deficit Review: Part 2

By | Commentary
And now for the stunning conclusion part 2…part 1 is here if you missed it.

Outlays:

Outlays for 2/2013 ended up at $324B, down $5B from last February’s $329B of outlays…that’s 1.49% if you don’t have a calculator handy. Small, but lets give credit where credit is due. Yet…there’s nothing terribly surprising about this…for a couple of years now, we have seen relatively flat spending as increases driven by the ever growing entitlement programs are mostly offset by decreases in other areas. The spreadsheet below shows the 32 categories for outlays I track, with 2012 vs 2013 YOY and YOY% on the far right columns

022013 Outlays by Type

Right at the top we see that payments to defense vendors and the education department are down by a combined 6.5B…pre sequester, and “Other” is down an additional $4.5B. Social Security, Medicaid, and Medicare combine for a $6.8B increase, with unemployment payments down $2.7B…which is in line with the trend we have seen over the last year.
One quick note on the federal crop insurance line that went from zero to $1.9B… The DTS is not terribly consistant about reporting “Other” expenses unless there is a large outlay on a particular day. Because of this, I catch what I can, but some of it inevitably falls into my “other” category. In total, we get to the correct total outlays figure, but some of the smaller categories don’t necessarily have the most accurate data. In this case, it is likely that there were at least some outlays in February 2012, but none ended up being large enough to make it onto the DTS. Bottom line with Outlays…it’s great we saw a decrease, but this is nowhere near being a material shift…it will be interesting to see what, if any effect the sequester has over the next few months.
Daily Deficit for 3/4: Although I couldn’t help myself on the 3/1 charts, I’m going to wait another couple days before I resume the YOY charts. If you just have to know, 3/4/2013 ran a $5B surplus on strong Monday revenues. I will wrap up the February review tomorrow with a look at debt
Mar 05
0

Must Read: Bitter Pill: Why Medical Bills Are Killing Us

By | Commentary
A new cover article from Time “Bitter Pill: Why Medical Bills Are Killing Us” is getting a lot of press. The author takes a step back and asks the obvious question everyone else has forgotten to ask for the last 30 years or so. Why the H#** is medical care so expensive? Why does 3 minutes with my kids Dr. cost $300? Why does an MRI on an 8 year old machine cost a few thousand bucks? The answer is…the medical industry as a whole has conspired to screw us all over…getting rich in exchange for the false promise of immortality. They use our ignorance, and their “expertise” to their advantage at every step of the way, and have fully used and abused our broken government to push through a myriad of laws that assist them in screwing us over.
I think this piece very important because it changes the direction of the conversation. For decades, insurance companies have been the bad guys…and the noble Doctors played the hero. But that’s BS. Do you think Dr Mc Dreamy wants to make $1000 for that hip replacement, or $200,000? He’s got a BMW to pay for, a couple mistresses, and a vacation home in Aspen to pay for so you know damn well what side of the fence he’s on.
And now it’s time for a personal story. A few years ago, I went to see a specialist about my hand…I had a tingling sensation in my pinky that wouldn’t go away, and Web MD convinced me that I was probably about to have a massive heart attack. It took this specialist about 1.5 minutes to correctly diagnose me with some kind of nerve irritation. Not to worry he said…He could do a surgery to fix me up…all he needed was $30k, and something about a shark with a laser on its head. Uhh…. really? For the record…for $30k, I would literally sell you my pinky, but that’s another conversation for another day.
The next step was an appointment with an electro shock therapist. For $2k, I sat in a chair while a university of phoenix grad stabbed me in my arm and hand and then shocked me. Like 20 times. The whole thing was recorded on a prehistoric looking machine that looked like it was pulled out of the hatch on Lost. Then…the real Dr. /specialist guy came in, turned up the juice on the shockinator 1.0, and gets me a few more times. Three minutes later, I’m paying my $30 copay and thinking that maybe waterboarding is torture after all.
Next up, a follow up with the specialist who sent me to get tortured tested in the first place. After a nice long wait, I get ushered into a lavish exam room. He takes a look at my hand, asks me how it feels, and promptly recommends that I get some electro shock therapy to confirm that his surgery will cure my pinky. I quickly reminded him that I just had that done and am only here to get my test results. (I am thinking I nailed it) After looking confused for a minute, he opens an envelope, flips to the back of the report, and gives me the good news…my  nerves are fine(except for that new facial twitch)…and I should just make an appointment….he’ll be happy to see me every  month indefinitely until electro shock therapy damages my nerves enough that the insurance company will pay for his surgery fees.
Three minutes later, I’m in my car thinking about what a friggin racket this guy is running. All in, I’m only out like $90 for three copay’s, but my insurance company gets billed like $500 for each visit and his buddy at the torture clinic got a few thousand for my “treatment” If he can talk me and another guy with a tingly pinky to swing by every month for a 3 minute checkup, he’s got enough to cover his BMW payment and a couple dates at Chili’s with his mistress.  Short story long…I never went back, and while still for sale, my pinky feels fine…I just needed to stop exposing it to electro shock therapy.
Back to the Time story..I recommend reading the whole thing…and it is long..if you want to understand some of the true problems with our medical system.  This topic has huge deficit implications with medicare/Medicaid outlays expected to grow exponentially over the coming decades as the Boomers all retire and get in line for their free hips, knees, and electroshock therapy….for which Dr. McDreamy would be more than happy to provide…for the right price.
Mar 02
0

Mayor Bloomberg: “people do seem willing to lend us an infinite amount of money”

By | Commentary
I just read this at politicker about some interesting comments by New York’s Mayor Bloomberg. He, like pretty much all of the elites seem to be under the impression that the US government can in fact borrow an infinite amount of money. If you believe in fairy tales…just like the Mayor, well, then I would encourage you keep loaning Uncle Sam Money at near zero rates. Get back to me in 10 years and let me know how that works out for you.
About a month ago in “Uncle Madoff’s Trust Fund” I wrote:
“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.”
I think the same needs to be said about US debt. Since my days in college, I can remember being told over and over by professor after professor…. the market assumes that US debt is risk free. This is a fundamental assumption for modern economics and finance….but let’s think about how moronic that is. Who is the US government? It is us…only led by a bunch of morons who can’t even write or pass a budget, much less balance one. The number of budget surplus’s our nation has produced in it’s history could probably be counted on  one hand…for those of us that can count that high. The current debt outstanding, fast approaching $17T, is about $50k per man woman and child. So…take a quick look around and ask yourself…who would you be willing to loan $50k to? Yeah…that’s what I thought. kind of scary huh?
So when you purchase that 10 year “risk free” bond paying 2%…just think about who you are counting on to pay it back in ten years….whatever yokel your fellow citizens have decided is the least biggest moron…or perhaps who will give them the most free stuff….that’s the guy, that’s the congress, that’s the Treasury Secretary you are counting on to return your $100 and change when 2023 rolls around. If you are just cashing in the bond you purchased back in 2002, you may noticed that things have changed a bit. That $100 bill only buys 1/3 of the oil it or 1/4 of the metals it did when you bought it. Of course the official inflation numbers were only like 2% a year, but who are you going to believe, Uncle Sam or your lying eyes? If that pattern continues, in ten years that nice crisp $100 treasury secretary Krugman pays you back with is going to be a rather uncomfortable piece of toilet paper.
So when will we stop believing in fairy tales? I’m not holding my breath.
Feb 28
0

Sarah Palin nails it??

By | Commentary
I’m no Sarah Palin fan. In fact, I am generally disgusted by both of our political parties…maybe I’ll discuss that another day. However, according to this Politico story Palin recently said:

“If we are going to wet our proverbial pants over 0.3% in annual spending cuts  when we’re running up trillion dollar annual deficits, then we’re done. Put a  fork in us. We’re finished. We’re going to default eventually….”

Wow!! Are politicians allowed to say that? She goes on to say:

“If we ARE serious about putting our fiscal house in order, then let’s stop the  hysterics, tighten our belts, and take our medicine”

Not to nitpick, but my math puts it closer to 3%, but I’m gonna give it to her…Palin Nailed it. Not Rand Paul, not Paul Ryan….Sarah Palin is the first person from one of the two parties I’ve heard speak the truth on this issue in a long time. And she’s exactly right. There will be defaults, there will be “haircuts” , there will be hell to pay for our lack of national budgeting skills…. I just don’t know when. Maybe I should just ask Sarah 🙂