Sep 01
0

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

By | Commentary

The August Social Security monthly update came out last week, but I am just now getting a chance to look at the latest results. If you aren’t familiar with the report, basically, it gives us the number of participants in the Social Security program, both the Old Age and Disability portions of the program. It also gives us average monthly payouts per category, and some demographic male/female breakout.

So…in a given month, the given population changes in two ways. First, new people reach retirement age or become disabled, adding to the population. Second, retired workers pass away, or disabled workers recover and join the workforce. Just to frame it, the current population on Social Security is 57.554M or 18% of the total US population and the average monthly payout is $1,162 per month.

In my prior two posts on June and July, I focused primarily on the retired worker population…by far the largest at ~37M. To continue that analysis for August, the monthly change was an increase of 71k over the prior month ending up at 37.575M people compared to last months increase of 112k people. So great news right? Well…not exactly. See,  there is a lot of seasonality involved, driven by retirement and death patterns that cause a lot of variation in rates over the year. December is generally the lowest,  at 59k in 12/2012. January is typically the highest at 171k of additions in 1/2013. The rest of the months fall somewhere in between. So…rather than comparing the monthly change to the prior month…it is best to compare to the year ago delta.

August 2012 had an increase of 85k, so this is an actual improvement, bringing the TTM change down a hair from 1.191M to 1.177M, still within a stones throw of the December 2009 1.240M record. So despite the small improvement, we are still adding people to the program at nearly a record rate and this rate will almost certainly continue to trend up over the next decade as we get into the meat of the Boomer retirements.

09-01-2013 August Social Security TTM

This is the same chart we’ve seen in prior posts, but I’ve narrowed the range only showing 2005 to present. You can clearly see the 2005-2008 average of about 500k doubling during the great recession to the 12/2009 peak, trending down, and then back up to the current peak just under 1.2M per year rate. You can see the small dip at the end….I wouldn’t get excited about that yet…but we will keep an eye on it.

Now, lets take a step back and look at the entire population. It includes disability, currently at 8.9M and growing at about 12k per month over the last year, as well as various subcategories of spouses, widows, and children. The entire population grew 82k to 57.554M, down from the year ago increase of 103k. Lets take a look at the chart:

09-01-2013 August Social Security TTM-Entire Population

This chart looks a bit less menacing. After following the same trend up to 1.6M per year the rate is has steadily declined to around 1.26M per year. As it turns out…most of the other categories seem to have more or less stabilized, with retired workers, and to a lesser degree disabled workers being the only materially changing categories. Still… 3 years past the great recession, we are nowhere near to the normalized rates we saw leading up to 2008. Bottom line, the TTM cash cost of SS related programs was $710B over the last 12 months, and is growing at an annual rate of $60B. By the time the next president takes office in Jan. 2017, that annual rate will be around $922B. By Jan. 2021…it will be closer to $1.2T.

So…to wrap it all up, 85k added to the welfare rolls in August 2013. The overall rate slowly is declining…for now, but the annual add is still nearly twice the pre-recession rate, and likely to turn back up before too long as the Boomers keep retiring in droves. There is no happy ending here…it will just get worse and worse and worse until it is ultimately defaulted on with the rest of the debt.


Sep 01
0

US Daily Cash Deficit 8/29/2013

By | Daily Deficit

The US Daily Cash Deficit for 8/29/2013 was $3.6B bringing the August 2013 Cash Deficit to $136B with one business day remaining.  Revenues finally surpassed the pace set by last year by $1B, and another $10B or so on 8/30 would put us at YOY growth of a meager 1%. For reference, the first 6 months of 2013 ran at +18%, and July came in at +9%.

Interesting…. though I am inclined to average them together….at 5% revenue growth. This, to me, seems like what may emerge as the new normal…not the 11-12% the CBO has forecast for the next couple of years. With a $3T annual revenue baseline, the difference between 5% and 11% growth is about $200B in 2014 and $400B in 2015….and it grows exponentially from there.

08-29-2013 USDD

With one day remaining….expect a $30-40B deficit tomorrow (well…8/30) substantial, but less than the $64B deficit posted on Friday 8/31/2012, since that day included ~$25B of SS payments due 9/3, but pulled forward due to Labor Day.

Outlays are worth noting today since come tomorrow they will be thrown out of sync….are down $10B. Just scanning through the categories…Defense vendor payments are down $6B and Education Dept outlays are down $3B, with other categories having smaller variances up and down. $10B is a 3% reduction YOY….not too shabby given the offsetting increases in Social Security…but unfortunately, I don’t see this trend lasting beyond the fiscal year end. That said…I didn’t think sequestration would stand, and I was wrong (though pleasantly surprised) on that.


Aug 29
0

US Daily Cash Deficit 8/28/2013

By | Daily Deficit

The US Daily Cash Deficit for 8/28/2013 was $10.6B bringing the August 2013 deficit through 28 days to $133B with two business days remaining. $12B of Social Security payments went out today…the last payment of the month, bringing August 2013 and 2014 as close to in sync as they have been all month. Revenues are back down YOY $2B under last year’s pace, but there is a good chance they will catch back up tomorrow as a few $B of excise taxes are likely to trickle in. Outlays are also down $10B, resulting in the deficit being down $9B(rounded) vs last year. Without a doubt…improvement is a good thing…we’ll take it…but this kind of meager improvement is substantially less than we have become accustomed to seeing.

08-28-2013 USDD

So…with two days to go…expect a small deficit for Thursday, followed by a large Friday deficit…likely in the $30-$40B range as September payments get pulled into August by the timing of the weekend and the Labor Day Holiday. Thanks to the holiday, we won’t have our final August numbers until next Tuesday 9/3, but I don’t mind waiting.

Aug 29
0

43% Pay No Income Taxes!! Well…not exactly…also-Fun with Math

By | Commentary

They pop up every couple of months…today by Jeanne Sahadi  at money.com. Now quite honestly, this one…if you bother to read it is better than most(but I’ll pick on it anyway), but the headline still blares out….”43% Pay No Income Taxes“. That’s terrible you probably think….nearly half of the population is getting a free ride. Those lazy slacking  (and literally) poor SOB’s…. Except… there’s just one little thing…these numbers always exclude employment taxes…for social security and medicare. As I detailed a few months back in Social Security: Crappy Deal…Getting Worse …Fica is a bona fide income tax of 15.3% of all income earned up to like $110k or so. So…that guy making $50k may not pay a lot of “income tax” as defined by the study, but he does pay $7500 a year for something that looks like an income tax, walks like an income tax, and smells like an income tax.

So let’s just cut the crap. FICA is an income tax…I laid out my hypothesis in Proof (well…circumstantial evidence) Social Security Implemented As Stealth Income Tax. Anyway…the bottom line is that these articles get me riled up because they are generally intellectually dishonest and just try to rile up tension between different income groups… If you want to play those kind of games fine…but do it for real and include the 15% FICA as income tax. Of course, nobody would click on that headline…”8.25% pay no income taxes”.. but I digress 🙂 So let’s skip over that and look at some math.

Lets take a typical family of 5 with an annual income of $50k. We know they pay $7500 of FICA taxes a year…but what about “income taxes.”

Right off the top…take off $12,200 for the standard deduction and another $3900/person for exemptions ($19,500) and you get down to $18300 of taxable income. The 10% tax bracket runs to $17,900, so if this was it…they’d be on the hook for about $1,800. But…take out some for medical, maybe some modest 401k and HSA contributions, maybe some business losses on a not so popular blog…getting down to $10k of taxable income could happen without too much effort, so $1k of income taxes.

But wait…they have 3 kids….and are almost certainly eligible for a 1k per kid credit…so they are eligible for a $2k refund (1k -3k=-2k) as it stands. Depending on the circumstances…they could probably push their income up to $65k or so before they technically started paying taxes, and this is a pretty cookie cutter scenario. No judgement here…but that’s the math….it’s pretty damn simple. So odds are, a good chunk of families making under $65k per year technically don’t pay “income taxes”. All I’m saying is that I’m not amazed, and this shouldn’t be a story at all….if these writers were capable of basic math, they would see that it actually makes a whole lot of sense. In fact, I’m surprised it’s not quite a bit higher…. Clearly…you don’t need to be a tax cheat to avoid “income taxes”…just the ability to do 3rd grade math.  Oh well…I’m sure our journalist’s sentence diagramming skills are impeccable.

Aug 28
0

US Daily Cash Deficit 8/27/2013

By | Daily Deficit

The Us Daily Cash Deficit for 8/27/2013 was $5.9B bringing the August deficit through 27 days to $122B with three business days remaining. Revenues have finally pulled even to August 2012’s pace at $179B…likely on track to edge out August 2012’s $204B of revenues by a few billion or so.

08-27-2013 USDD

With three days left…August is looking like a big disappointment…with flat revenues, and adjusted for timing, more or less flat cost….where we are really looking for +10% revenues and 1-2% reduction in outlays to match earlier month’s performances. This would make two in a row…though we should probably average them together….I’ll do that once the finals are in. Obviously…if August ends like that…it won’t be a good thing, but September Revenues is what I am most interested in. Quarter ends are always stronger in revenues….and subject to more uncertainty. If we see solid YOY revenue gains across the board…it will be good news…or at least more of what we’ve seen over most of 2013. If…however, revenues disappoint for the third month in a row, it will be a pretty good sign that trouble’s a brewin…and the pony ride that the first half of 2013 has resembled is just about over.