Sep 26
0

US Daily Cash deficit 9/25/2013

By | Daily Deficit

The US Daily Deficit for 9/25/2013 was $9.0B knocking the surplus through 25 days down to $44B with Three business days remaining. Tax deposits not withheld fell to $1B from $4B yesterday….more or less in line with the drop off we expected. For the month, this category is currently up $9B over last year, good for an 18% YOY gain. On the other end of the spectrum, Corporate taxes are basically flat at a little less than 1% YOY, while taxes withheld from paychecks are up 11%.

09-25-2013 USDD

Total revenues, currently up $10B YOY (3.5%) should continue to grow…before getting a big boost Monday, which is an extra workday over last September and a Monday at that. With strong Fannie/Freddie “dividends”…tacking on another +20B of YOY revenue seems feasible…which would put us pretty close to the +10% we want to see.

On the other hand, that extra business day also gives us an additional day of outlays, which are already at +21B thanks primarily to timing. I’m sticking to my $70B surplus forecast for the rest of the month, though it is starting to look a bit high. However, you never know what kind of fiscal year end surprises are in store, so I’ll be an optimist and hold tight.

 

Sep 26
0

September 2013 Update : Social Security-Annual Change In Retired Workers

By | Commentary

The September numbers were just released…. the total Social Security population grew 140k to 57.695M people, with the average recipient receiving $1,162 per month. Penciling that out yields a very large number, but that’s not really what I am interested in. I watch this series because I am looking for a material change in the rate of retirements….which is what we would expect some time soon as we get into the meat of the baby boomer retirements.

For some reference, in the late 90’s, we were adding about 300k people to Social Security programs(Old age and disability) per year. By 2006/2007, the rate had edged up to about 700k per year of additions before spiking to over 1.6M in 2009 as millions jumped onto Social Security/disability after losing jobs due to the recession. Since then, it had slowly been drifting down, with the latest annual rate being 1.248M additions per year. For the month, last September had 155k additions, 15k higher than this September so the slow drift downward is continuing, but we are still adding a lot of people each year.

I guess you could say it’s a good thing that the rate is coming down, but the truth is, we are still adding people at a phenomenal rate, and that rate will likely be heading back up before too long. For reference…while SS is adding an average of 104k people to it’s rolls each month…the total population is growing at about 187k per month, and jobs are being added at 184k per month over the last 12 months. On the cost side, we are seeing growth of about $62B per year due to growth in the population and the annual cost of living adjustment. So all else equal, to keep the budget deficit constant, we need either 62B of new revenue each year, or need to make $62B in cuts….each year in perpetuity, and that # will probably start accelerating up over the next 5 years. So it’s bad, and getting worse. Remember all the drama last year surrounding the $85B sequestration?

Finally, just a thought on retirement choices. For most, you have a choice to apply for social security from when you turn 62 all the way up until 70, but the longer you wait, the more money you get. I suspect that for those who can, they try and work as long as they can. However, during the “great recession” many in the 62+ age group who lost their jobs couldn’t find jobs, and therefore took social security earlier than they would have liked at a reduced rate. Now, the economy isn’t quite as terrible, so more seniors are working just a tad longer…delaying their retirement, but ultimately increasing their potential payout. So while that may be temporarily suppressing boomer retirements, in the long run, the higher payments could actually make the long term situation worse.

On the other hand….why worry about the long run. The odds of this turd staying afloat for another decade, much less 30+ years is slim to none. I suppose one of the reasons I do this is just to document the absurdity in real time. None of this is rocket science. Anybody with a spread sheet and the ability to do middle school level math should be able to sit down and see that none of this will end well….and yet, a (vast?)majority of politicians and citizens seem deluded enough to believe we can just keep kicking the can. Hint Hint….we can’t 🙁

Sep 25
0

US Daily Cash Deficit 9/24/2013

By | Daily Deficit

The US Daily Cash Surplus for 9/24/2013 was $0.5B bringing the September Surplus through 24 days to $53B. Revenues from “Taxes Not Withheld” dropped from $9B on 9/23 to $4B on 9/24….stronger than the 2012 amount by $1B, but still indicating these receipts are probably trailing off.

09-24-2013 USDD

Total cash revenues for the month are now running only 3% over last year but should get a material bump on 9/30, ending somewhere between +5%-10%. Not bad, but we may pay for it with a weak October. Tomorrow, we get the final large SS payment of about $12B which will more than likely force the first deficit over $2B that we’ve had in several weeks.

Cash in hand was $55B, which we will probably see grow by $10-20B by month end, lets just say to $70B absent any “extraordinary measures (EM)”. The first week of the month is typically pretty brutal….assuming the government isn’t shut down, we would probably run a $50B+ deficit in that first week of October alone. So Treasuries 10/17 date looks good on paper. However, the CBO also came out with an estimate stating between 10/22 and 10/31. About a month ago, I had guessed early to mid November…citing the difficulty of forecasting without fully understanding what EM magic tricks Treasury had left up their sleeve. Regardless of who is correct, it does seem clear that within the next 6 weeks, either the debt limit will be raised, or we will be in for one hell of a show….maybe even both 🙂

Sep 25
0

The Debt Limit Will Be Raised

By | Commentary

The news of the day is that Treasury Secretary Lew has announced 10/17 as his latest greatest estimate of when we will “for real” become unable to cover outlays with incoming cash. Remember….hitting the debt limit isn’t the problem(that happened back in May and was a completely voluntary event)…running out of cash to pay bills is the problem.

Looking at a partial month is problematic, so for simplicity, let’s just assume we run out of cash at the end of October. What would November look like?

Over the full month, per my current forecast, November should see about $202B of cash revenues, offset by about $331B of outlays, good for a $129B deficit. But the good news is….we can still pay for $202B of those expenditures. But how to decide what to pay…and what not to pay?(Normally…they would issue $129B of debt in exchange for cash…that will cease to be possible) That is the problem. $35B or so of interest is due…probably want to pay that. Rolling expiring debt isn’t a problem…..If I pay off $1B of expiring notes….then replace it with a new $1B issue…debt outstanding remains constant. Not paying Social Security, Medicaid or Medicare would save $133B, which is enough, but that probably wouldn’t end well. Active duty military pay??? Nope. below is my forecasted outlays….what would you cut?

09-20-2013 November 2013 Expenditures

And this is the dilemma our poor…poor politicians find themselves in…both Republicans and Democrats. The government spends about $3.8T per year, but only manages to bring in $3.0T of revenues. The plug is debt…..$800B. So now here we are….right at the debt limit. If it isn’t raised, all else equal…..we have to cut $800B of spending. But unfortunately…all else is not equal. If you cut $800B of spending….by definition that cuts GDP by $800B directly, and who knows how much indirectly. This in turn, cuts revenues, which cuts spending….it’s either a terrible or wonderful circle, depending on who you are. Just for reference $800B is equal to about 16M 50k per year jobs….perhaps 8M (or less)government jobs I suppose 🙂

That’s what it would take to balance the budget. Is that what you really want? Look folks…it’s simply not politically possible….therefore it will not be done. Oh sure….they may reach the limit for a few days or even a week….maybe “slow paying” some bills (trust me…the checks in the mail) but not for long and I doubt it even gets that far. The debt limit will be raised…not because it’s the right thing to do…but because it is the easiest thing to do.

Don’t get me wrong…I’m not endorsing this….it’s not what I think should happen, rather, it’s what I think will happen. Honestly, it’s almost certainly too late….this cycle will continue until it collapses on itself and all of this debt (on and off balance sheet) is simply defaulted on, probably by inflating it away.

Not that anyone has asked, but my solution would be over say a 10 year period (wish we could have started 10 years ago)  simply cut all non-essential and unconstitutional expenditures (including social security, Medicaid and medicare) 10% per year until they are zero….reducing taxes along the way. I would also default immediately on all $16.7T of debt outstanding….if you were dumb enough to lend money to Uncle Sam…..aka our congress with a single digit approval rating…. well…you deserve to lose your $16.7T.

Finally, when it was all said and done I would cut taxes to put them in line with the new expenditure requirements…probably somewhere between $500B and $1T per year. Yes…there are a lot of details to work out, and it would never actually happen, but the short term pain would be made up by long term prosperity…which is why it will never happen….it’s been a long time since anybody told the American people no, and I see no indication anybody is going to start now. The majority has found it’s way into the nation’s pocket book demanding pensions, schools, food stamps and infinite government paid medical care far beyond the nation’s willingness, or even ability to pay. No…there is no political solution here…the game will continue until it all crashes and burns. That day will come soon enough, but I doubt it is 10/17/2013.

Stay tuned….we look to be in for an interesting month.

Sep 24
0

US Daily Cash Deficit 9/23/2013

By | Daily Deficit

The US Daily Cash Surplus for 9/23/2013 was $13.7B as revenues from “Taxes not Withheld” defied the historical trend for the second day in a row, posting $9.1B of cash revenue compared to the comparable year ago (9/24/2012) cash revenue of $5.7B. Last year, these revenues dried up before the end of the week, ending at only $300M on 9/28/2012. If we don’t see a similar crash over the next few days, it wouldn’t take much to handily beat the year ago revenue $ from this source.

09-23-2013 USDD

So on that strength, revenues show strong YOY gains for the second day in a row, and are now at $+7B….a 3% YOY increase with additional gains looking likely. The Monthly Surplus is now sitting at $52B with 5 business days remaining in the month. There is still plenty of upside left with the likelihood of topping $70B growing by the day(for now).