much smaller rate than I had thought. Less than 1% per annum,
the lowest since the 30s. My first thought was that this was probably
not anticipated 10 years ago. So I looked up one credible source for
population forecasts. The Social Security Trust Fund lives and breathes
this stuff. I looked at the 2000 base case (intermediate) assumptions
for population in 2010. I was very surprised to see that they hit the
nail on the head. Good for them.
Just for the heck of it I looked up the 2010 SSTF report to see if the
new forecasts were on track with the old ones. Then I got confused.
While the SSA correctly forecast what our population would be a decade
ago, they are currently overstating the population by 7,500,000 people.
That comes to a 2.4% overstatement as to just how many of us there are
walking around. I found that interesting.
There is a direct correlation to total economic activity and population.
The more people, the more GDP. The more mouths to feed, clothes to
wear, transportation, shelter, healthcare the greater the output will
be. The number varies from country to country so there is no definitive
relationship between populations and GDP. For example, China has a
population of ~1.3b and a GDP of ~5T, therefore the GDP per person is
$3,557. This number is much higher in the USA. Based on the census
number and current GDP the US has a ratio of $47,300 of GDP per person.
Germany has a population/GDP ratio of $41,000.
I don’t want to suggest that that if there were one additional person in
the US that GDP would grow by $47K. It doesn’t work like that. But it
is absolutely correct to say that if population were higher, GDP would
be higher as well. Population drives demand.
Back to SSA. What are they going to do with their population estimates?
The answer is they have to take them down. When they do, they will have
to adjust ALL of their numbers. The have to adjust both short and
long term estimates. Given that we now know that our population is
smaller than SSA had assumed and is growing at a smaller rate, there are
significant implications to the retirement system. All of those implications are negative.
From the census data alone SSA will be forced to conclude A) the date that the system goes negative is not 2037 and B)
the date that SSA goes permanently cash flow negative is not 2015. Just
from the census data I am now forecasting that the date that the SSA
goes permanently cash negative was 2008. We will never see a return to a
cash surplus. The 2037 drop-dead date will be shortened by a minimum of
5 years. I say they system explodes in 2030. These are very material changes.
Is the population data a game changer on the debate that is now raging
on the fate of SSA? I think it is. If you were worried about the
long-term solvency of the system and its impact on the broad economy
before, you should be much more worried about those things after the
census report.
In 2000 SSA correctly forecast the population for 2010. In the same 2000
report SSA forecast a CASH surplus at SS for 2010 of $93 billion. The
actual result of 2010 will be a deficit of $45 billion. The $140b miss
is largely a function of the lasting impact of the 08 recession and the
continuing high unemployment. That big miss is also function of our
population growing at a smaller rate than what had been assumed.
At so many levels we are fooling ourselves as to how wealthy our country
is and how quickly we should be growing. The estimates we use are out
of whack with reality and therefore we have this false belief that we
can and should be able to just grow our way out of trouble. This
fundamental belief is part of the budgetary policy driven to stimulate
higher growth. It is part of the Feds thinking in their effort to push
against the string with policies like QE. Those policies will not
achieve the desired effects. The reason is that there is less of us
around then has been believed. Slow population growth will trump any
stimulus Congress or the Fed throw at it.
If we did in fact have an extra 7.5mm people in the country and they
contributed to economic activity by the $47k multiplier it would
translate into additional GDP of ~$353 billion. A very big number. That
is approximately equal to the GDPs of Austria, Norway, Taiwan or Saudi
Arabia. It is double that of Chile. The states of Virginia, Washington
and Massachusetts have similar populations. On a pure population
comparison the 7.5mm is equal to the entire population of countries like
Israel, Switzerland and Hong Kong.
It will be interesting to see if D.C. recognizes the slow population
growth in the US and ignores the implications. My guess is that that
they will. But they will do so at our collective peril. There is an
assumption in Washington that we can simply grow our way out of our
problems. The census report says we can’t.
How can it not be the case?
Better a heavy consumer riddled with debts than a light consumer packed up with savings.
Poor people in the world have nearly no debt.
Because we live like we're the richest nation, over time we've come to believe we are the richest nation... at least until the bills come due.
Perception is reality
The bills will never come due.
It's like the scene in Goodfellas where the waiter is too scared to bring the bill to gangster Tommy, who has maxed out his line of credit. So, when the owner approaches, Tommy kicks the shit out of him.
Needless to say, when China or UAE come looking for payment, they will find gangster Benny and Fatboy Nuke to set them straight.
Until the US citizen revolts OR our military loses access to oil, the debts will keep going on the tab since there is no one around to stand up to our military.
Very good write-up. It will be interesting to see the impacts of them revising their projections, and the current negative status of the SS "fund".
I agree with Bruce that these are very material. However, I also agree with Bruce that it is *possible* that they will not revise their numbers.
The accounting fraud is so stark now, it's hard to take things into perspective. At the "high" level, even the topic of SS can be considered "in-the-noise".
(SS is not in-the-noise, but at some level, one can lose perspective among the 1.4 quadrillion in worldwide derivatives.)
Bruce-
I can't think of anything I've read lately, that is as important as these numbers you have pointed out. Will the idiots in Congress take heed? No- it will be business as usual until there is a crisis and it is too late. Then we can just raise the debt ceiling- right? Problem solved!
Ho hum. Yet another Social Security hit piece by bankster Krasting. No mention of the true elephant in the room, Medicare.
He is a broken record constantly harping on Social Security when there other much bigger problems that need attention. I will give him credit though for getting us peons to fight among ourselves while the banksters give themselves another bonus with our taxpayer money. Nicely done.
Well, we can always cut back on the military instead of hitting Social Securtiy à la Krasting.
Ha! Ha! (Joke, get it?) Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha! Ha!
Social Security makes up 20 percent of the total budget, Medicare 13 percent.
They are both important. I focus on SSA as it facinates me. There is 2.6 TRILLION in ssa today vs 300b in medicare.
Tell you what, you start a blog about medicare. Send me a link and I will read it. Promise. If not, buzz off.
The Bankster
SS does not make up 20% of the "total budget". A budget includes both income and expense. SS expenses are about 20% of total budgeted expenses, but SS income tax is over 43% of total budget revenue.
You almost never hear anybody discuss the SS income side. For example, how many times have you heard the myth that half of Americans pay no federal taxes? Blog after blog I see this lie. The missing word is "income" tax. When you include SS tax, which is certainly a federal tax, no American who works is getting a free ride.
I believe the reason we hear so much about reforming the income tax and SS expenses (but never about reforming the SS tax) is that SS taxes are highly regressive, income taxes somewhat progressive. That is why most of the noise about taxes, coming as it does from the wealthy of both parties, is about lowering marginal income tax rates and cutting SS benefits.
There is a simple way to make SS solvent: cut the military expenditures to about 15% of the budget and spend the savings on SS benefits. Or extend the retirement age by a couple of years. Or freeze benefits for an extended period of time. There is nothing about the system that requires that we abandon it altogether or replace it with a private retirement system administered by Wall Street.
Take away Social Security and you take away the last vestiges of a free democracy the US still has.
Shame on you all. Junks across the board!
Not all of us are millionaries like you!
So we weren't a democracy before socialist insecurity was forced on every american? I guess you are right, in the sense that in a pure democracy, minorities can just go hang.
We used to have a decentralised federal republic with serious limitations on what the central government could do to the states and individuals. Now they add to theft programs like SSA nationalisation of your access to health care, and new for this week regulation of what we can do on the internet. Washington is out of control.
Can you please explain your correlation between SS and a free democracy. If you are discussing the problems with a true democracy when you have 51% of the populace voting for the government to steal from the other 49% and deliver to them. Then maybe you are on to something. But I have a feeling that isn't where you are going. (Disclosure, I'm not even close to being a millionaire, and I live in a constitutional republic).
I am a trillionaire.
I keep all my funds in cash & coin, in a giant secured building with a giant $ on the side of it.
Sometimes these pesky burglars try to break in, but my three nephews always come through at the last minute to foil the plot.
I like to swim in my money and even had a diving board put in so I could dive into my trillions and swim around in it.
Social Security is like Ebola virus - spreads quickly and kills the host.
Small issue compared to some others, yes. But an issue that is understandable for those that don't grasp the larger more critical ones. A stepping stone to awareness of our true dilemma. Well done Bruce.
I am 54. I do not qualify for Social Security (as I worked for myself and .gov, not long enough in jobs working in the private sector).
I also cashed in my IRA 2 years ago.
No government money for me!
All the foreign students graduating in the USA are going home, the only people still attracted to America are fruit pickers from Mexico and drug dealers, so not only the quantity is rapidly decreasing but the quality too
I live out West and from my observation the Hispanic population has grown enormously in the past decade. I would suspect due to work mobility and immigration fears that this group is underreported in the census but their numbers could be in the several millions. The business lobbyists want these people in and will push for legislation which provides a path to citizenship.
http://www.renewoureconomy.org/about
Millions? In the US, people count in trillions. Million is so for poor people.
The quality of immigrants has declined since the 1960s when the elites decided to discriminate against Europeans (the traditional American population) in favor of alien third world populations from Africa, Latin America, and Asia.
I think at bottom the problems the US faces are predominantly demographic, qualitative and quantitative factors, although it's not "correct" to discuss it.
The US has been transforming itself into a third world banana republic for decades, beginning of course by importing non-white populations from third world banana republics.
Why is anyone suprised that los pollos are coming home to roost?
BoZ, I've been writing the same thing for the past year. A country is determined by its people, not its geography. If you were to replace all the Japanese in Japan with Mexicans, you would get a backwards, impoverished island nation rather than the technologically advanced economic powerhouse that is modern Japan. Same thing goes for the United States.
For almost 400 years we kept the Mexicans out of our territory, but modern liberalism and blind generosity has doomed this once great nation. The U.S. won't fall apart overnight; it still has a significant White and Jewish population. Interbreeding will lead to a future population that is smarter than Mexican but dumber than European. The U.S. will fall behind other advanced nations in technology, will become economically weak, and will eventually be taken over by a foreign society, either economically or militarily.
"Multiculturalism" has made people feel like they no longer have any stake in the future of the U.S., for it no longer represents a particular race or culture -- why should I fight and die (or work hard and pay taxes) for a country where Mexican kids will replace my own? The subsequent total absence of esprit de corps will accelerate the demise of the U.S. The best scenario we can hope for is that the U.S. will splinter into several new countries along ethnic lines and that these future states, having learned from the mistakes of the past, will maintain their cultural and border integrity.
"Interbreeding will lead to a future population that is smarter than Mexican but dumber than European. The U.S. will fall behind other advanced nations in technology, will become economically weak, and will eventually be taken over by a foreign society, either economically or militarily."
Ok, so when the smart foreigners send their young adults here to get educated the cost should be bearing 1 child. Get them chanks pregnant when they get off the plane so it only bothers them freshman year when classes are typically easier.
All semi-seriousness aside, its way past too late. Even in the whitey-ville midwest where I live, if I go to work late all the little kids waiting for the school bus are brown and hitting eachother. My child will have to learn spanish (and to fight).
And that is the same stupidity as ever. Japan wasnt made in a day. As stupid as requesting that a cat who evolved from specific environmental pressures turn immediately into another type of cat due to change in environmental pressure.
Los pollos that are coming back to roost are none other than the locuras del blanquito, so to speak. It's not because there was latin american immigration that the US is now a Banana Republic. It's a Banana Republic because of a simple metric: Gini. And that wasn't caused by people who don't even show up on the records. That was just las locuras de blanquito in his afán for privatizar and desreglamentar.
Wait till a lot of educated and productive Americans follow those foreign students outside of the country. As the ability to make a middle class living and have any social mobility is removed there will be a flight of productive people and capital. Of course the govs response will be restricting travel and controlling capital.
Since we have effectively no immigration policy I think this means that even third world peasants are voting with their feet and are deciding not to come here in quite the anticipated numbers.
Astonishing if true considering that our chief executive is trying his darnedest to cement in citizen entitlements for these people.
I suppose these results could also reflect some combination of under-counting (not likely with the Obama crowd), citizen emigration (should be more anecdotal evidence) and a shrinking birth rate (already below replacement without new immigrants).
Something doesn't add up.
The do Congressional districts by the census. There are many things that the census drives. The government believes in the results to a significant extent. The census cost us $10B? It is closer to being correct tha anything else that we use.
It is certainly more correct than the current estimates by SSA. Those will Have to be clawed back.
Yeah, I'm willing to believe the census figures are likely the most accurate numbers we have but like you, the headline numbers surprised me. I guess I'm going to have to dig into the details and see what's what in terms of demographics.
Propagandists should not bother with facts.
Here's the solution: more brownies, anchor babies up, muslim invasion, waves of third world peasants. On the other side, white people locust fleeing over seas to the few decent places left in the world.
And where would that be? Is it the place the politicians and bankers plan to flee?
My wife brought the census form home when they first came out. I told her I would take care of it (by placing it in a drawer never to be looked at again). I looked at the questions and they were pretty typical; not too invasive. But I can barely be bothered to pay my bills, why whould I fill out a gov form? Anyway a couple of weeks later while at work, a door knocker snagged my wife and got her to answer the questions. I do not recall exactly, but I dont beleive the form ever asked if US citizens lived at the address. They only asked for make and model of those under the roof.
I find this troubling when the other day, it was annouced several states received additional representation due to census results. The districting and voting boundries are based upon faulty data (they count non-voters). Am I wrong here?
The Dems expected this to work in their favour, and got burned, or maybe they expect the 'Latinos' to make Texas a Blue state ?
Why do you think they are pushing so hard for the DREAM Act? They know the illegals are undercounted, and they need to do something to get them on the grid. The libs own the exec branch agencies and the judiciary at the appellate and circuit levels, so they can hang on until 2020 to retake the seats they lost and to take the seats that were gained in the south and southwest. Viva la Reconquista.
its actually more simple than that ... just cattle for the packing plant ...
http://www.ritholtz.com/blog/2010/09/student-loan-debt-credit-card-debt/
Cooter