United States 2012 Cash Deficit: Only $1.096 Trillion [View article]
I have never understood the allure of defined benefit pensions...public or private. Rather than giving me control and true ownership of what over a career is a substantial amount of money, you trust either government bureaucrats and politicians to take good care of your money for half a century, or you trust your company. Why? How? There are only a handful of people on this earth I would personally trust with such a responsibility, and I can guarantee none of them are politicians or CEO's of fortune 500 companies. I guess to me, the primary purpose of these plans is usually to screw over employees. Governments get a steady stream of income to spend on other projects, at least for a while. Companies get to push cost off onto future CEO's, and if the employee decides to leave before they retire, there is a good chance they get nothing, so it gives the company a lot of leverage. No Thanks!!. I'll take my measily 5% 401k match over that promise waiting to be broken any day.
United States 2012 Cash Deficit: Only $1.096 Trillion [View article]
Yes, but the economy has become addicted to the additional spending now. That $1T annual deficit is directly supporting ~20M $50k per year jobs....and that's not even looking at secondary and tertiary effects as the money sloshes around the economy. People chose careers, chose where to live, made investments, and countless other decisions...based on demand that cannot and will not be sustained. Weaning the economy without killing it would take a very skilled surgeon....Not sure that analogy actually works, but I think you get my point.
United States 2012 Cash Deficit: Only $1.096 Trillion [View article]
Statisticool, There are solutions, but they involve much short term pain, and thus will never be enacted. My goal with this article, in fact with most of my writing isn't necessarily to say what should happen, but rather to project what actually will happen. We just witnessed an epic battle in congress just to raise taxes on 2% of the population by a mere $60B per year, and that's probably an overestimate. Can you imagine raising taxes by $500B per year(or $5T over 10 years if you prefer) and cutting spending by another $500B? It could never happen because even if the long term benefit was worth the short term pain (and it would be painful), the voters simply wouldn't have it.
Geithner Hits Debt Limit Early To Squeeze Republicans [View article]
Though generally ignored, cash is an integral piece of the monthly debt/deficit equation You might be interested to know that the cash in hand averaged $215B in 2009 after peaking out at $715B on 10/23/2008. For 2012, the average cash balance has been $64.5B. In February of 2012, due to refunds ect, the daily burn rate was about $12B... There are huge monthly swings in cash inflows and outflows, so the cushion you need varies throughout the year. January is generally a light month, running "only"a $52B cash deficit in 2012...2013 will probably be even lower, so cash demands over the next 30 days will be light coming into tax refund season that starts in Feb...or at least should start in Feb...I guess we'll have to wait and see.
Geithner Hits Debt Limit Early To Squeeze Republicans [View article]
On Refunds....my model, and what I cover at USDailyDeficit.com uses daily data from the Daily Treasury Statement to project upcoming cash inflows and outflows. This works fairly well most of the time, but if tax refunds are delayed this year, it's going to nuke my model for at least a few months pushing billions of dollars, possibly $100B+ back a few months, stretching out the "debt limit cushion". This doesn't exactly present the best set of incentives...miss your deadline and you delay tax refunds for millions of families, but it gives you more time for your political battles. Oopsy!!
On the politics, I try to be an agnostic observer using the data we have to predict not what should happen, but what will happen. The point of this article was that Treasuries announcement about hitting the limit next Monday is pure political theater and is a completely voluntary act. The only thing I'm surprised about is that it took so long to do it, but I guess they had to wait until the news cycle was right. If It was me in charge, I would have done it months ago to force the issue. Whatever happens, this is getting more interesting by the day
Increase Debt Limit Or Tax Refunds Will Not Go Out [View article]
Thanks for the link. We should be seeing some pretty heavy cash inflows for the remainder of the month that I expect to push the debt limit constraints into mid Jan/early Feb. I don't know enough to accurately model extraordinary measures, but I can see that it is ongoing since intragovernmental debt is "magically" shrinking and being replaced with public debt. If it were me in charge, I would just get it done with and issue debt up to the debt limit tomorrow, while beefing up cash. It really doesn't affect the true day of reckoning at all, but it forces the issue.
Are Intragovernmental Holdings Real Debt? [View article]
Well, I wouldn't call any of it good news, though admitting the facts at hand is certainly a good first step. So as soon as both poltical parties issue statements admitting they have collectively stolen $4.8T over the last 30 years or so, then we can start thinking about the possibility of a feasible go foreword plan. I'm not holding my breath. As the "social security trust fund" is drawn down, we will be forced to issue "real" debt in its place. Through 11.5 months, Intragovernmental debt has increased a mere $15B in 2012 vs $1.131T of external debt, indicating that we are pretty much there. The problem is, who will buy an additional $10T of debt over the next decade? That's over $30k of additional debt per man woman and child. How many families of 4 do you know that plan on buying $120k of treasuries over the next decade? The Fed? In the long run, I don't know that it really matters, as I am quite sure on and off balance sheet liabilities will be defaulted on if not outright, then by being inflated away.
Are Intragovernmental Holdings Real Debt? [View article]
Jelrod3, I can believe it and can pretty much guarantee that they will continue to get elected. This is one of the main reasons I have come to the conclusion that regardless of how much time is left on the clock, the game is pretty much over.
Are Intragovernmental Holdings Real Debt? [View article]
Logical, You may be right in saying that solutions that would fix the problem exist. My belief is that the likelihood of them being enacted are slim to none. For better or worse, we live in a democracy, and I see no indication that voters from either side of the aisle are even close to being willing to accept any combination of spending cuts or tax increases that even get in the ballpark of fixing anything. Today, we are talking about $16T...there is a very high probability that 4 years from now we'll be talking about $20T. I hope I'm wrong, but the ending to this story is pretty close to being written in stone.
Are Intragovernmental Holdings Real Debt? [View article]
Logical, I'm not sure we actually disagree on anything. If it wasn't clear, the point of my article was not intended to be..."you can't owe yourself money, so we are now $4.8T better off". If anything, my larger thesis, covered in prior posts and posts to come will be that we are too far gone to save. The math on this is pretty simple and crystal clear, as you touch on above.
Increase Debt Limit Or Tax Refunds Will Not Go Out [View article]
Ron, What about my article are you claiming is false? It's pretty basic algebra. If the debt limit is not raised, tax refunds, and a lot of other things will not be paid. No amount of revenue increases or cost cutting between now and February is going to get the government enough cash to process $200B of refunds on top of another $200B in deficits we will probably run between February and March. The debt limit must be raised, and honestly, it probably will be. Now, we can argue all day about how we got to this point, who is to blame,and what the right path foreword is...check out my blog or other SA articles for that discussion. This article is about some pretty simple math, and I stand by my calculations.
Increase Debt Limit Or Tax Refunds Will Not Go Out [View article]
TAS, Even the federal govenment's books must balance. As of yesterday, the federal government had $38B cash in hand and the ability to borrow an additional $57B. These are not "highly unlikely numbers", they are cold hard facts. I used 2011/2012 actual daily reciepts and outlays from the Daily Treasury Statement to forecast the upcoming outflows. Will it be perfect? No. But it will be pretty darn close.If they can't borrow, there will be no cash to send out. That is a problem in itself, but that's just how it is.
Leesero, I think that would be a start, but I don't really see it happening. Do you? Supposedly going over the fiscal cliff gets the government another $400B in revenue and cuts spending by about $100B, which all else equal might get you down to $500B-$600B deficit for 2013. The doomsayers warn that this would crush the "recovery", reduce revenue, increase unemployment ect... In effect you would just cause a lot of chaos for little net improvement in the deficit. I don't know, but it would make an interesting experiment in any case. Whatever happens, I'll be following it on my blog.
Social Security Demographics Guarantee US Bankruptcy [View instapost]
W&O...the math is so simple and obvious, and yet here we are..nothing but crickets :)
United States 2012 Cash Deficit: Only $1.096 Trillion [View article]
United States 2012 Cash Deficit: Only $1.096 Trillion [View article]
United States 2012 Cash Deficit: Only $1.096 Trillion [View article]
United States 2012 Cash Deficit: Only $1.096 Trillion [View article]
There are solutions, but they involve much short term pain, and thus will never be enacted. My goal with this article, in fact with most of my writing isn't necessarily to say what should happen, but rather to project what actually will happen.
We just witnessed an epic battle in congress just to raise taxes on 2% of the population by a mere $60B per year, and that's probably an overestimate. Can you imagine raising taxes by $500B per year(or $5T over 10 years if you prefer) and cutting spending by another $500B? It could never happen because even if the long term benefit was worth the short term pain (and it would be painful), the voters simply wouldn't have it.
Geithner Hits Debt Limit Early To Squeeze Republicans [View article]
You might be interested to know that the cash in hand averaged $215B in 2009 after peaking out at $715B on 10/23/2008.
For 2012, the average cash balance has been $64.5B.
In February of 2012, due to refunds ect, the daily burn rate was about $12B... There are huge monthly swings in cash inflows and outflows, so the cushion you need varies throughout the year. January is generally a light month, running "only"a $52B cash deficit in 2012...2013 will probably be even lower, so cash demands over the next 30 days will be light coming into tax refund season that starts in Feb...or at least should start in Feb...I guess we'll have to wait and see.
Geithner Hits Debt Limit Early To Squeeze Republicans [View article]
On the politics, I try to be an agnostic observer using the data we have to predict not what should happen, but what will happen. The point of this article was that Treasuries announcement about hitting the limit next Monday is pure political theater and is a completely voluntary act. The only thing I'm surprised about is that it took so long to do it, but I guess they had to wait until the news cycle was right. If It was me in charge, I would have done it months ago to force the issue. Whatever happens, this is getting more interesting by the day
Increase Debt Limit Or Tax Refunds Will Not Go Out [View article]
Are Intragovernmental Holdings Real Debt? [View article]
The problem is, who will buy an additional $10T of debt over the next decade? That's over $30k of additional debt per man woman and child. How many families of 4 do you know that plan on buying $120k of treasuries over the next decade? The Fed? In the long run, I don't know that it really matters, as I am quite sure on and off balance sheet liabilities will be defaulted on if not outright, then by being inflated away.
Are Intragovernmental Holdings Real Debt? [View article]
I can believe it and can pretty much guarantee that they will continue to get elected. This is one of the main reasons I have come to the conclusion that regardless of how much time is left on the clock, the game is pretty much over.
Are Intragovernmental Holdings Real Debt? [View article]
You may be right in saying that solutions that would fix the problem exist. My belief is that the likelihood of them being enacted are slim to none. For better or worse, we live in a democracy, and I see no indication that voters from either side of the aisle are even close to being willing to accept any combination of spending cuts or tax increases that even get in the ballpark of fixing anything. Today, we are talking about $16T...there is a very high probability that 4 years from now we'll be talking about $20T. I hope I'm wrong, but the ending to this story is pretty close to being written in stone.
Are Intragovernmental Holdings Real Debt? [View article]
I'm not sure we actually disagree on anything. If it wasn't clear, the point of my article was not intended to be..."you can't owe yourself money, so we are now $4.8T better off". If anything, my larger thesis, covered in prior posts and posts to come will be that we are too far gone to save. The math on this is pretty simple and crystal clear, as you touch on above.
Increase Debt Limit Or Tax Refunds Will Not Go Out [View article]
What about my article are you claiming is false? It's pretty basic algebra. If the debt limit is not raised, tax refunds, and a lot of other things will not be paid. No amount of revenue increases or cost cutting between now and February is going to get the government enough cash to process $200B of refunds on top of another $200B in deficits we will probably run between February and March. The debt limit must be raised, and honestly, it probably will be.
Now, we can argue all day about how we got to this point, who is to blame,and what the right path foreword is...check out my blog or other SA articles for that discussion. This article is about some pretty simple math, and I stand by my calculations.
Increase Debt Limit Or Tax Refunds Will Not Go Out [View article]
Even the federal govenment's books must balance. As of yesterday, the federal government had $38B cash in hand and the ability to borrow an additional $57B. These are not "highly unlikely numbers", they are cold hard facts. I used 2011/2012 actual daily reciepts and outlays from the Daily Treasury Statement to forecast the upcoming outflows. Will it be perfect? No. But it will be pretty darn close.If they can't borrow, there will be no cash to send out. That is a problem in itself, but that's just how it is.
The Spending Problem [View article]
I think that would be a start, but I don't really see it happening. Do you? Supposedly going over the fiscal cliff gets the government another $400B in revenue and cuts spending by about $100B, which all else equal might get you down to $500B-$600B deficit for 2013. The doomsayers warn that this would crush the "recovery", reduce revenue, increase unemployment ect... In effect you would just cause a lot of chaos for little net improvement in the deficit. I don't know, but it would make an interesting experiment in any case. Whatever happens, I'll be following it on my blog.