By Bruce Krasting
On the FFB
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
. 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%
Total Benefits Paid
2011 - $360.1B
2012 - $384.5B
Increase – $24.4B
Increase in % – 6.7%
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: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.