Mar 24
0

Do You Believe In Fairy Tales?

By | Commentary, Quantum Economics
It Seems that for the first time in four years, the senate has passed a budget. Republicans are bleating that it “has zero real deficit reduction” and “never balances.”…which is probably all true, but as I discussed a few weeks back, neither does Paul Ryan’s Path to Prosperity. You see, any monkey with a free copy of Google Spreadsheets can make a lot of bogus assumptions about revenue growth and cost cutting and squeeze the “projected” deficit down to zero in 10 or 20 years…Just ask the Congressional Budget Office, who in 2000 projected to much acclaim that the US would be more or less debt free by 2010.
In any case, we now have affirmation by both political parties that one of three things is true about each of them.
  1. They are a bunch of Lying SOB’s…
  2. They aren’t lying, they are just incredibly incompetent.
  3. Or…they believe in fairy tales.
I really don’t know which it is…all seem feasible to me. However, it is time for you to decide if you believe in Fairy Tales…or not. The fairy tale they want you to believe…written by the economic high priests of the last century is quite simple. First…deficits don’t matter. Government, led by the infinite wisdom of elected politicians and an army of bureaucrats can borrow and print an infinite amount of money with no consequences. They will save your job, care for you when you are sick, educate your children, and even manage your retirement for you…all you have to do is believe….and maybe tap your shoes together 3 times.
For comparison, let’s think about what might make sense for a typical family budget. It is generally accepted that an ideal state is a surplus…you should be saving, let’s just say 10% of income…. for rainy days, paydown of debt, and hopefully accumulation of enough wealth for the rather modern invention we call “retirement.” We could have a debate over the specifics, I think we can all agree that more or less, this is a pretty good prescription for success.
Imagine if instead of following the above, our family, with a household income of $80k/year, decides to take the prescription advised by modern economic theory. At this point in time, our family, has accumulated debt approaching $500k….not mortgage debt…unsecured credit card debt. Further, they are accumulating debt at the rate of about $40k per year, with no realistic plan to address the annual deficit, much less actually pay down debt accumulated so far. At this point,  really should be bankrupt, but fortunately for them, their credit card company keeps increasing their credit limit, and at this point has actually removed the limit altogether.
Do you see this ending well? Is it possible that a financial policy that would so obviously asinine for a household makes sense for a nation? Ben Bernanke, Tim Geithner, Republicans, Democrats, and most modern economic theory thinks it will. That’s what’s in the Fairy Tale, so it must be true…right? You need to decide for yourself what you believe. Is infinite deficit spending the right medicine to heal a sick economy, or is it just another line of cocaine….inching closer to bankruptcy and ultimately…death?

 

Mar 23
0

3/21/2013 Daily US Cash Deficit

By | Daily Deficit
The US Daily Cash Deficit for 3/20/2013 was $6.3B bringing the March 2013 deficit to $80B through 21 days. Per my math…tax deposits are sitting right at 10% over year ago numbers….we’ll see if that sticks.

2013-03-21 USDD

Enjoy the weekend everybody…I’m off to see The Croods
Mar 22
0

Raiding the Fake Social Security Trust Fund…To Fund Another Fake Social Security Trust Fund??

By | Commentary
Just read this…about how the chief actuary Social Security Stephan Goss is planning to raid one fake social security trust fund to fund another fake trust fund with some awesome accounting voodoo(actually…a 2 line journal entry ought to be all it takes). I wrote a while back about the “Trust Funds” at Seeking Alpha in “Are Intragovernmental Holdings Real Debt” In my opinion…they simply don’t exist….they are just a figment of a government accountant’s imagination…and these shenanigans further reinforce that in my mind. To me…all they represent is the balance of funds already stolen and spent…nothing more. The sooner we accept that…the better.
Mar 22
0

3/20/2013 Daily US Cash Deficit

By | Commentary
The US Daily Cash Deficit for 3/20/2013 was $13.4B driven by the third round of Social Security payments and $6B of tax refunds.. Through 20 days, the March 2013 deficit stands at $74B..$15B worse than March 2012 at this point, though about half of that is likely some Social Security timing. More or less, the two months are quite similar, with outlays fairly flat, and revenue gains related to tax hikes being offset be revenue losses elsewhere and higher tax refunds…which we account for (correctly) as negative revenue. With seven business days left, I don’t expect any large surprises… 3/2013 looks to be on track for a deficit in the ballpark of last years $139B…less $15-$30B of outlay timing that will likely go out 4/1 instead of 3/30 like  in 2012 due to the way the weekend falls.

2013-03-20 USDD

It’s a bit early to begin dreaming about April, but let’s take a quick glance anyway. April is usually the shining star of the year, aided by everybody’s favorite holiday…Tax Day!! All of those poor fools who decided not to give Uncle Sam an interest free loan by over witholding trudge down to the post office, lick a crusty 5 year old forever stamp, and grudgingly drop a big, hopefully not hot, check in the mail for good old Uncle Sam. Because of this, April sees about $130B of additional revenue, and is generally the “least worst” month of the year. Last April posted a Surplus of $59B, breaking a 43 month streak of deficits going back to 2008. That sounds like a good initial estimate….Assuming revenues continue to outpace 2012 by ~10%, this will likely be more or less offset by increased outlays related to the same March timing issues discussed above. The wildcard is going to be that $15B Medicaid payment, and the potential for even larger than 10% increases in revenue. I don’t know how this will play out, but there were reports that perhaps $100+B of income was shifted into 2012 primarily by corporations and high net worth individuals. (anybody remember all those “special” dividends”?) 4/15 would be the last chance to pay those for individuals…so maybe we’ll see a 15-20B pop?? I wouldn’t count on it, but  it’s just another wildcard out there.
Mar 21
0

3/19/2013 Daily US Cash Deficit

By | Daily Deficit
The US Daily Cash Deficit for 3/19/2013 was $7.8B, bringing the monthly total to $61B, vs. year ago deficit of $50B
2013-03-19 USDD
I think it is worth noting that tax deposits are up $16B over last year…an 11% improvement, which is in line with January…February only posted 4% growth. If I see this continuing past tax season and into May/June, we can probably say that yes, we have a bonafide 10% or so increase in tax revenues….for one year. The problem with the CBO report is that it forecasts that growth again for 2014 and then 12% for 2015. Taxes were raised once…so a jump from 2012 to 2013 was expected….but it creates a new baseline….Any revenue growth from 2013 to 2014 and beyond then needs to come from bonafide growth…all else equal. This isn’t completely unprecedented…5/2005 to 4/2007 was 24 months in a row of 10% yoy growth in FTD’s, but I think we all remember how that ended. Who knows what the future holds, but to me, this sure doesn’t feel like 2005.
[Update] Just for some reference…the number of people employed grew at 1.1% over the last 12 months. Assuming that stays relatively constant…the only way we get to 11% growth again next year is that we all pay another 10% on top of what we did this year….Go get ’em!!