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Debt Factoids - CBO
If you’re interested in the subject of our national debt there is a new must read report from the CBO on the topic. Some odds and ends I found interesting:
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We
know that there is a law called the debt ceiling. We also know that we
will (again) hit that limit early in 2011. Many think that this will be a
line in the sand fight with the new Congress. Phooey. This from the CBO
report:
Options for the Treasury When Debt Approaches the Limit
Suspending Issuance of Maturing Cash Management Bills in the Supplementary Financing Program.
$200b
Suspending Flows and Redeeming Securities in Government Accounts.
A) $124B (The TSP is a
retirement program for federal employees similar to a private-sector
401(k) plan; the G Fund is one component of the TSP and is solely
invested in Treasury securities.) NOTE: Federal workers 401Ks to be
raided. An interesting precedent)B) At least $200b from Civil Service Retirement Fund (there is ~$800b in total, but there are some restrictions on usage.C) $20b Exchange Stabilization Fund
Swapping Debt with the Federal Financing Bank.
$15b
Total $560 billion.
Conclusion: If there is to be a fight over the debt limit, it could be a long one.
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The CBO is speaking with forked tongue in this report. A critical issue is; “How do we define what is debt at the federal level?” There are so many components to the puzzle. I give the CBO an A+ for this position:
CBO believes it is appropriate
and useful to policymakers to include Fannie Mae’s and Freddie Mac’s
financial transactions with other federal activities in the budget. The two entities do not represent a net asset to the government but a net liability—that is, their impact on the government’s financial position is a negative one.
So how does CBO actually account for F/F? They get a D- for this:
Neither CBO nor the Administration currently incorporates debt or MBSs issued by Fannie Mae and Freddie Mac.
That’s interesting. They say they “should” do it, but they don’t. Who makes that decision?
The Administration’s Office of Management and Budget (OMB) makes the ultimate decision about whether the activities of Fannie Mae and Freddie Mac will be included in the federal budget.
The White House decides which categories of debt are included when
determining what constitutes debt? That is convenient. When did that
happen? We are not talking chicken scratch here. The good folks over at
the Fannie and Freddie have piled up $6 Trillion in debt. We would blow
out the debt ceiling set by congress by over 40% if that came on the
books. So it stays off the books. But the debt is staring us in the
face. Funny system.
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This caught my eye:
Interest from the Federal Financing Bank.Payments of interest from the FFB to the Treasury have been less than $1 billion annually in recent years but
are projected to increase (to as much as $6 billion) because of higher
loan activity (particularly by the Department of Energy’s Advanced
Technology Vehicles Manufacturing program and the Rural Utilities
Service). As of September 30, 2010, the FFB portfolio totaled $60 billion.
Hello, what is this? For interest to rise at the FFB from 1 to 6b it
would have to imply that there is at least a 4-5 fold increase in the
balance sheet. This means that there is a plan to grow the FFB by $250b.
Who is going to be the beneficiary of that? That is a hell of a lot of
money. Is the FFB going to fund a solar build-out? The existing
portfolio of DoE loans:
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Another (minor) data point of interest.
The federal government has a number of Trust Funds that are used as
accounting vehicles to store up IOUs from the government. The principal
accounts and current holdings:
Social Security Trust Fund…….2.6t
Civil Service Retirement Fund...0.8t
Military Retirement Fund……...0.3t
Medicare……………………….0.3t
All others…….………………...0.6tTotal:…………………………..4.6 Trillion
These funds are all anticipated to grow over the next decade. One has a growth rate that is way out of whack with the others:
The Military Retirement Fund is growing at three times the rate of the
others. The raw numbers are, 2010=282b and 2020=1,012b. A ten-year
increase of $730 BILLION. (a 350% increase) What is that about? Are we
planning on a new war, or have we just not accounted for the retirement
costs of the military properly over the past decade or two? I suspect
(hope) it is the latter.
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We
have all seen a form of this chart elsewhere. It is nothing to be proud
of. Yes, there are a few countries in worse shape than us. But Italy,
Greece and Belgium are now making front-page news with their debt. And
the USA will have a different outcome than Japan.
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This
chart of Trust Fund Assets is central to our problem. Notice that these
funds are scheduled to grow by more than 2 trillion. It sounds nice
that the nation has Trust Funds where money is squirreled away someplace
safe. Money that can be used to pay bills (Social Security) when they
come due over they next 20 years.
But there is no money in the Trust Funds. They have IOU’s that obligate
future taxpayers to come up with the cash when needed. The Trust Funds
have nothing to do with “savings” in the traditional sense.
This has been going on since 1983 when Greenspan created the accounting
gimmick and the huge surpluses that followed. The fact is we do have
future liabilities, and there has been some savings set aside for that.
But the money has been spent on funding past deficits. So really there
are no savings. I am not sure there is a fix to this problem. I do know
that the bills on this are coming due in the next five years or so. I
don’t think we will make it another ten-years without having to confront
this problem.
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This scares me to no end. Am I the only one that sees a catastrophe of biblical proportions building here? Even most of my own family won't listen when I tell them to be prepared for what's coming -- a debt debacle!
anyone who came on board for the first Iraq war, 1990, and stayed is about to hit retirement age. Not certain if that Trust funds handles claims for disability, Agent Orange, etc, which they are just starting to pay claims on, and which will overwhelm their ability to handle it. If you have been in Iraq/istan for more than three tours and have PTSD you aren't fit to take a job probably, and you are probably in your early forties, not that there are any jobs. Bottom line the cost of taking care of these people is huge
If you think your slaves to the govt. now (and you are) just give it a few years (if we don't collapse first).Analysis pegs U.S. debt service at $800B by 2020
http://chicagobreakingbusiness.com/2010/12/analysis-pegs-u-s-debt-service-at-800m-by-2020.html#more-24273
By the way that Fannie/Freddie debt obama kept off his budget is $6.3 Trillion Dollars
http://www.businessweek.com/news/2010-02-01/fannie-freddie-kept-off-budget-dividends-counted-update2-.html
If you think your slaves to the govt. now (and you are) just give it a few years (if we don't collapse first).
Analysis pegs U.S. debt service at $800B by 2020
http://chicagobreakingbusiness.com/2010/12/analysis-pegs-u-s-debt-service-at-800m-by-2020.html#more-24273
By the way that Fannie/Freddie debt obama kept off his budget is $6.3 Trillion Dollars
http://www.businessweek.com/news/2010-02-01/fannie-freddie-kept-off-budget-dividends-counted-update2-.html
#we will make it another ten-years without having to confront this problem
10 years.. Bruce, pal you're too generous..2+ years max...
QEnnn next years wont less +1.5 trln $$ a least.. more likey
2 trln..
in 2011 10 year bond will see 5 % , in 2012 10y will see 7 %.. then collapse as as all 1/2 of federal revenues will go to seriving 20 trln $ in debt...
alx
Timmy G to get a cell next to fellow ponzi schemer Bernie M.
Not to worry...you can alway pay off old debts with new debts. It's just paper after all.
Very Scary future.