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Obama’s All In Bet - Plus - Social Security at Mid-Year

Bruce Krasting's picture




 
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On the FFB
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The Treasury department’s private bank, the Federal Financing Bank (FFB) issues monthly reports. For some reason they have delayed recent releases. The March data came out on Friday.

 

I believe that the activities of the FFB will be a campaign issue before too long, Maybe that is why the tardy release of data. If a politician wanted to blast the Administration, the lending to the private sector by the FFB would be a good place to look for some ammo. Consider the money that went out the door, and who got it in March:

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On Social Security

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The numbers for 2012 through June have been released by Social Security (SS). Revenues are up from the first six months of 2011. Expenses are shooting through the roof. Some year over year comparisons:

Total FICA/SECA tax revenues (January – June)
 
2011 – $358.0B
2012 – $384.4B
Increase - $26.4B
Increase in % - 7.4%
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Total Benefits Paid
 
2011 - $360.1B
2012 - $384.5B
Increase – $24.4B
Increase in % – 6.7%
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Primary Deficit (payroll taxes minus benefits paid)
 
2011 – Deficit $1.1B
2012 – Deficit = $0.1B
Change – +$1.0B

The YoY revenue increase at SS is a reflection of the slightly improved economy. The following is a look at the monthly revenue numbers for 2011/2012:

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These revenue numbers tell the same story that the overall economy is telling. The first quarter economic results were above trend (possibly due to weather?) the second quarter is showing clear signs of deceleration.

If the economy continues to slow in the second half of the year (a sure bet at this point), SS’s numbers will follow the economy south. Based on all of the cash inflows and outflows at SS, I’m now projecting a cash loss at SS for the full year 2012 of $60B (-$48B in 2011). All of that shortfall must be funded with debt issued to the public. Whatever your expectations were for the federal borrowing requirements for the rest of the year, you can add another $50+B onto the list.

There are economic headwinds wherever you look these days. The biggest obstacle for the USA is the fiscal cliff of 1/1/2013. The most optimistic scenario that I can imagine for US 2013 GDP is +2%. If the country were able to squeak out that much growth, it would still be very bad news for SS. If growth averages just 2% in 2013, then SS’s cash deficits will top $100B.

I leave with a note from the CBO. It put out a very important paper this week on the status of the budget and what the country is faced with. The report runs 105 pages, there is only one sentence that matters:

 
It is not possible both to keep taxes at their historical average share of gross domestic product (GDP) and to keep the laws unchanged for Social Security, Medicare, and Medicaid.

I hope that some of the deciders read this report.

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Sun, 06/10/2012 - 01:19 | 2511621 Yes_Questions
Yes_Questions's picture

 

 

I agree. 

I was ranting when I wrote this.

Forgive me if I went astray.

Sat, 06/09/2012 - 10:29 | 2510059 wonderatitall
wonderatitall's picture

so? obama is the most historic president in history of historic historical proportions of history... and he is black., no matter what chrissy rocks says....so he gives free money from a crony fascist bank....he is black and a democrat....and historic

Sat, 06/09/2012 - 10:41 | 2510093 11b40
11b40's picture

...and this is different from the crony capitalist Bush 1 & 2 political dynasty?

Sat, 06/09/2012 - 13:42 | 2510430 Imminent Crucible
Imminent Crucible's picture

Of course it's different. Bush wasn't black.

Sat, 06/09/2012 - 10:22 | 2510048 spinone
spinone's picture

They will continue to inflate their way out of obligations as long as possible, while lying about CPI

Sat, 06/09/2012 - 10:31 | 2510046 Bob
Bob's picture

Since the vast majority of real national income gains over the past 30 years went to the top 10%, whose "payroll tax" is capped at around $100k of income, rather than the bottom 90% who, as a group, pay the vast majority of SS taxes (on their entire incomes), is it any surprise that the cash flow problems of SS are manifesting so much earlier than predicted when Reagan "reformed" the system?

Odd that the working class was screwed out of jobs and income by tax incentives and trade policies that promoted off-shoring of jobs . . . and now find themselves called to account for their outrageous expectations of "entitlements" by the very people who made off with most of the money. 

Gotta luv them job creators. 

Sat, 06/09/2012 - 10:36 | 2510075 Hedgetard55
Hedgetard55's picture

The person who reaches the cap pays much more into SS than the person who makes the average wage of $50k.

Sat, 06/09/2012 - 10:44 | 2510096 Bob
Bob's picture

Of course, but with both groups paying the same tax rate, the number of payers at the 100k income level would have to be at least 50% of the number of payers at the 50k income level for the two groups to have equal aggregate contributions.  I don't have time to search out the data, but I'm sure the national income distribution is far more skewed than that, i.e., there are far more than twice as many payers at the 50k income level. 

Sat, 06/09/2012 - 10:17 | 2510043 Jackfish
Jackfish's picture

Thank you for your focus on this. 

Why hasn't this been a campaign issue yet?  Is it being held for later in the summer for more potential effect?

Sat, 06/09/2012 - 12:42 | 2510285 ElvisDog
ElvisDog's picture

It's not an issue because it's too early. What you want is peak momentum (or conversely peak defensiveness on your opponent) right before the election. The RNC will bring out the heavy guns, as will the Dems, but not for a few months.

Sat, 06/09/2012 - 11:28 | 2510169 smlbizman
smlbizman's picture

its not an issue because its all the same team....

Sat, 06/09/2012 - 12:48 | 2510294 jeff montanye
jeff montanye's picture

it is all the same team (reminds me of professional wrestling).  however the data bruce shows don't seem to justify his language of revenues (up) vs. expenses (through the roof) when the deficit actually shrank this year.  i agree the probable trajectory of the economy does not bode well, but don't oversell a point as it damages credibility, imo.

Sat, 06/09/2012 - 10:40 | 2510091 Yes_Questions
Yes_Questions's picture

 

 

The RNC is still working on the sound bites.

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