This page has been archived and commenting is disabled.

CBO REPORT - OMG!

Submitted by Bruce Krasting on 01/31/2012 22:47 -0400

The Congressional Budget Office (CBO) is out with its annual report. It’s a blockbuster. This 165 page monster is filled with dozens of charts, graphs and detailed projections. It will be talked about for weeks. The report provides a dismal outlook for the economy. There is one data point I'd like to focus on.

Here is the CBO forecast for real GDP for 2012 and 2013:

The 1.1% Real GDP number for 2013 surprised me. The CBO’s expectations are way under those of both the “Blue Chip” economists and the Federal Reserve:

What does it mean if the economy is going to slow, as CBO now thinks? Some consequences:

The CBO now forecasts Social Security to run into trouble in just a few years. This is a very substantial change in the outlook for SS. Changed fortunes make it certain that America’s favorite entitlement program will be on the table for a significant re-vamp.

The CBO has answered two critical question:

1) In what year does SS first goes into deficit (including interest)?

2) What is the size of the SS Trust Fund when #1 has been achieved?

Key data is here:

Using this information, we can estimate the Trust Funds (TF) balances over time, and compare them to what SS forecast in its report to Congress ten-months ago:

SSTF's "Intermediate" (Base) case:

The bottom line is that the SSTF is going to top out three years ahead of “schedule” and be $800B shy of what it was “supposed” to be.

I think the CBO report has created a big headache for a good number of folks in D.C. Most of them are running for office this year. They certainly won't be able to wave the CBO report as a measure of how well they are doing.

- advertisements -

Wed, 02/01/2012 - 02:43 | 2115655 OutLookingIn

One must remember one salient point -

All those hundreds of millions of dollars amounting to billions over the years, that you and employers have deposited by way of pay day hold backs, into Social Security, has been raided by the Treasury Department, who left inter-governmental bonds in place of the cash.

There is NO MONEY! The cupboard is bare. Has been all along! What is a bond? A debt instrument.

All those SS benefit payments are borrowed (printed) cash. This is one way, in that extra QE finds its way into the economy, devalueing the dollar by way of delution. Causing devalued currency induced cost push inflation.

Wake up and smell the coffee! Which will cost you more tomorrow!

Wed, 02/01/2012 - 16:01 | 2117497 misnomer

Here in Canada, the same crap is being fed to us fools..er, I mean citizens. The federal gov. doesn't know where all the retirement money we paid into the pension plan went, but they are changing the game plan to accomodate the loss (which implies the money was there to begin with, which I doubt). Pay more in premiums now, so we can give you less when you retire at 80 (providing you are alive to claim).

Maybe that's what gov's want to do? Up the retirement age until it meets the average age of mortality? I have now come to the conclusion that I will work until I drop dead. Maybe even after that (as fertilizer), if the gov so decrees it necessary to top up the fund.

Wed, 02/01/2012 - 07:58 | 2115805 nmewn

"All those hundreds of millions of dollars amounting to billions over the years, that you and employers have deposited by way of pay day hold backs, into Social Security, has been raided by the Treasury Department, who left inter-governmental bonds in place of the cash."

And the surest way to verify this is to ask to see the room where this pile of cash is stored. You'll get a blank stare and silence.

Not ever being fully satisfied with watching eyes glazing over & bureaucratic brain freeze, I rooted around and found this...

http://www.dispatch.com/content/stories/local/2010/03/14/social-check.html

The last quote is "priceless"...lol.

"Those bonds are protected by the full faith and credit of the United States of America," Kennelly said. "They're as solid as what we owe China and Japan."

And then one day there was a fire at a small office in West Virginia...

Wed, 02/01/2012 - 12:42 | 2116654 GeezerGeek

Several decades back I was standing before a bank teller and noticed the FDIC sign. I started chuckling and the teller asked me why. I replied that being backed by the full faith and credit of an organization $2 trillion in debt hardly made me feel safe. After a few seconds of silence she replied that she'd never thought of it that way.

Wed, 02/01/2012 - 08:53 | 2115854 StychoKiller

Some videos that tell it like it is:

http://reason.com/blog/2008/10/24/saving-social-security-episode

Wed, 02/01/2012 - 08:26 | 2115824 Isotope

That's OK.

I'm sure the Treasury Department will accept those photocopies Kennelly keeps in his closet at home.

Wed, 02/01/2012 - 07:06 | 2115790 Stroke

It all started with Lyndon F'ing Johnson (Ithink I spelled his name right), and his stinking VietNam (unfunded) war; so that VietNam could give us cheap sneakers.

Not realy cheap......It cost us 58,000 lives.

Wed, 02/01/2012 - 12:50 | 2116685 GeezerGeek

Don't pin it all on LBJ. JFK did his part too, both for the quagmire and for the deficit spending stuff. Further back, I think it was Eisenhower who got us into Viet Nam. He wanted an economically stronger West Germany, and the French insisted we help them in French Indochina - where they were getting beaten by the Viet commies - in return for which they would allow Germany to become stronger. I don't recall the exact time or circumstances, but we can blame the Vietnam fiasco on the French as well as the U.S politicians who waded deeper into the insanity.

Wed, 02/01/2012 - 03:02 | 2115669 prains

1.1% growth for 2013 will all be "printed"growth, real value and growth have decoupled to the point of no return. the growth sphincter has no squeeze left in it,all that's left is a giant digital butt plug.

Tue, 01/31/2012 - 22:57 | 2115331 TruthInSunshine

More good investigative financial journalism, full of facts, highlighting of critical data, and a sound and rational summary as to the consequences of this CBO report from Bruce Krasting, who could teach the lame ass stream media, and especially the clownish so called 'financial news networks' of cnBSc and Bloomturd the fundamentals of doing the job they proclaim to do.

Wed, 02/01/2012 - 11:42 | 2116401 blindfaith

So, exactly 8,237 people who read ZH and this column understand and agree. In the mean time, in a mear 24 hours the world has moved on so the politians can wipe the sweat off their forheads and sigh a relief.

There is no such thing as MSM, they are simply PR departments of corporations run by valley girls and boys.

Tue, 01/31/2012 - 22:51 | 2115310 Almost Solvent