The Market Ticker
Commentary on The Capital Markets- Category [Federal Government]
Logging in or registering will improve your experience here
Main Navigation
MUST-READ Selection(s):
America Is DONE

Display list of topics

Sarah's Resources You Should See
Sarah's Blog Buy Sarah's Pictures
Full-Text Search & Archives

Legal Disclaimer

The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.

NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.

The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.

The Market Ticker content may be sent unmodified to lawmakers via print or electronic means or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media, to republish full articles, or for any commercial use (which includes any site where advertising is displayed.)

Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.

Considering sending spam? Read this first.

2019-03-22 15:43 by Karl Denninger
in Federal Government , 115 references
[Comments enabled]  

Heh, why not.

From the current MTS....

 

"Social Insurance and Retirement" = Social Security and Medicare (combined) is $484 billion.

Approximately 80% is Social Security, so $387 billion.  Spent is $425, or a cash deficit of about 9%.  Not so bad.

The rest is Medicare or $97 billion taxed and $257 billion spent, or a cash deficit of about 62%.  Catastrophic; you'd have to roughly triple the Medicare tax rate to balance it (as opposed to add 9% to Social Security.)

Medicaid, of course, has zero tax associated with it and that is another $223 billion, or almost as much as Medicare.  You said triple, eh?  Multiply by six to get to parity, not three.  And by the way that excludes Veterans which is accounted for separately.

Now this is off the chart.  Of the detailed data due to shifting things around the numbers look somewhat different, but not much different.  Let's do it off the numbers.

Note that on budget only shows $115 billion of employment and retirement taxes; the other $356 billion was off budget.  Ain't that special?

Social Security ($448 billion) and "Health and Human Services" ($483 billion, Medicare and Medicaid, mostly) have almost-identical spending but one is funded with a 12.2% tax and the other funded with a 2.9% tax.  Guess where the problem is when one runs a small but real operating cash deficit and the other is catastrophically in the hole while both spend close to the same amount?

Uh huh.

Are we ever going to stop conflating these two and putting them together?

Probably not as long as we don't start pointing out that if this is not stopped and the nation goes off the fiscal cliff, which will happen almost instantly when that shift in the deficit occur, the "lack of civility today" will, in retrospect and by comparison, appear to be far nicer than the average Girl Scout convention.

View this entry with comments (opens new window)
 



2019-02-13 14:50 by Karl Denninger
in Federal Government , 426 references
[Comments enabled]  

There's simply no other way to express this....

 

These numbers are for only three months, so for the full year multiply by four.

Again, the total "social insurance and retirement" tax grab is $274 billion.  Social Security is a 12.3% tax (up to the cap) and Medicare is 2.9% (no cap.)  The split is thus roughly-speaking ~19% Medicare, the rest (81%) Social Security.

If you want to get down into the detailed numbers they don't "quite" add there because there is both spending and tax revenue that gets bucketed in each from the various line items.  But it's not off by much; the "line item" (without the bucketing) comes up as 74/26 -- not materially different.

81% of $274 billion is $222 billion.  Social Security spent $251 billion.  That's a ~29 billion shortfall.  Not good but there are a lot of Treasuries held against that requirement, and by 2026 the budget impact as a percentage starts to fall because the boomers start to die, statistically speaking.  In other words Social Security had a ~12% shortfall over the first three months, indistinguishable from my last look (12% .vs. 13%.)  This is easily fixable on a forward basis without much economic pain.

Medicare, on the other hand, spent $153 billion but took in just $52 billion.  That's a shortfall of 66%; that is, two thirds of it is unfunded.  You would have to more than triple the Medicare Tax Rate in order to bring it to parity.

That's an "improvement" over the nearly 75% deficit in the first month but we are in fact talking about bleeding out in two minutes rather than three; the outcome does not change.

Add to that "Health" (Medicaid, mostly) and it's much worse; now you take in $52 billion but pay out nearly $300 billion.

Note that the deficit thus far is $319 billion.  If you were to get rid of the deficit between Medicare and Medicaid .vs. tax receipts you would almost close the deficit to zero.  If you also increased the FICA tax rate by 13% (to just under 7% for "each half"), increased the income cap where it stops being collected or some combination that wounds up in the same place as well the deficit would be effectively zero.

$319 billion over three months equals roughly $1,300 billion, or close to $1.3 trillion in deficit for the entire fiscal year.  The only good news is that April is usually a strongly positive month (as a result of taxes being due) but either way the deficit is almost-certain to be in the neighborhood of $1.1 trillion this year.

You cannot fix this with either taxation or cost-shifting. It is mathematically impossible to do so.

For example you'd have to nearly double the individual income tax rate on everyone, including the middle class; to close the gap by increasing the corporate tax rate you would have to raise it by more than an insane and utterly impossible 600%.  Any claim that we can solve this by making people pay "their fair share" is a flat-out lie.

You cannot get there by "cutting spending" on other than these programs either; if you cut all "other spending" to zero along with transportation and education you'd only cover 30% of the deficit.  Cutting military spending to zero (which is obviously impossible) wouldn't get there either.

There is only one way to solve this problem and that is to collapse Medicare and Health spending by 80%.  You can only resolve the problem by collapsing the medical and health insurance monopoliesforcing everyone to publish a price for everything and charge everyone the same price, where said price must be handed out before service is provided, along with telling everyone involved that for any and all conditions in which a lifestyle change will remove the need for treatment government will pay zero unless the person in question makes that change.

The trend is not improving and it is not "The Next Generation" that will have to deal with this.

This has to stop right damn now or it will blow up before we get through the next Presidential term -- and no, you cannot tax your way out of it either.  The people in Washington DC -- Congress and the President -- must be held personally and politically responsible for their refusal to deal with the only way to put a stop to it, which is to destroy the medical monopolists using existing, 100+ year old law, and to do it right damn now.

And if they refuse we the people must enforce our demand for them to do so.  They will refuse, I remind you, unless forced by the people -- and there are peaceful and lawful means to do exactly that (e.g. a general strike.)

Nothing less than the literal existence of this nation as a Constitutional Republic is at stake.

View this entry with comments (opens new window)
 

2019-01-02 06:00 by Karl Denninger
in Federal Government , 2426 references
[Comments enabled]  

I said NOW damnit.

 

12.4% tax for FICA, 2.9% for Medicare.

Total is 15.3%.  Of that 81% is FICA, 19% is Medicare.

The total in "Social Insurance and Retirement" taxes taken in (that is, the entirety) in the first two months of the fiscal year was $179 billion.  Of that $145 billion was Social Security tax and just $34 billion was Medicare tax.

Social Security paid out $167 billion.  That is more than $145 billion but there are bonds that are being cashed -- quite a lot of them in fact -- and the structural deficit for that program is $22 billion or 13% (that is, 87% of the payouts are offset by pay-ins.)  If you got rid of the disability scamming you'd close the gap materially; SSDI has paid out almost $24 billion in the last two months.

The point on Social Security is simply this and anyone saying otherwise is a damned liar:  A 13% structural deficit is fixable without a crazy amount of pain (either by lifting the salary cap, a 13% increase in the tax rate (to 14% total; 7 and 7) or some combination of the two, and that assumes no effort on reduction in disability scamming.)  Further, the load on the Social Security system from the boomers will start to fade as they begin to pass within the next 10 years.

MEDICARE, ON THE OTHER HAND, SPENT $129 BILLION BUT ONLY TOOK IN $34 BILLION.  IT HAS A 74% STRUCTURAL DEFICIT.  YOU WOULD HAVE TO QUADRUPLE, ROUGHLY, THE MEDICARE TAX TO BRING IT INTO BALANCE.

THE REAL OUTRAGE IS THAT TO THE MEDICARE FIGURE YOU MUST ADD MEDICAID WHICH MAKES IT MUCH WORSE AS THERE IS NO TAX FOR THAT COLLECTED AT ALL!  CMS (Centers for Medicare and Medicaid Services) HAS PAID OUT $270 BILLION THUS FAR THIS FISCAL YEAR AND WE ARE ONLY TWO MONTHS INTO FISCAL 2019!  THAT IS UP FIFTY BILLION OVER LAST YEAR'S RATE AT THIS TIME -- AN UNBELIEVABLE 24% INCREASE!  THE TOTAL SPENT BY CMS IS MORE THAN DOUBLE STRAIGHT MEDICARE SPENDING WHICH MEANS TO COVER IT ALL YOU'D NEED TO INCREASE MEDICARE TAXES NOT TO 400% BUT TO MORE THAN EIGHT HUNDRED PERCENT OF WHAT THEY ARE NOW.

While I suspect some of this increase was a result of game-playing with Treasury not paying people right near September 30th in an attempt to "cook the MTS" for the end of fiscal 2018 and thus "announce" a smaller deficit it is extremely unlikely that all of it can be attributed to that sort of gamesmanship.

There is no "entitlement crisis" in Social Security.  It is all in the medical side and it is going to bankrupt the nation and government both at the state and FEDERAL level unless it is stopped right here and now.

These are not my numbers or projections; they are the actual cash flow from the Treasury department.  They do not reflect what someone thinks will happen they reflect what actually has happened and is happening -- right here, right now.

The MTS is truth just as your bank statement is truth because the MTS, as a cash flow statement essentially is the Federal Government's check register!

You can tamper with asset values and you can make all sorts of projections and claims but if you have ever run, examined or done accounting for a business you know that cash flow is always truth.

Any media publication, "pundit" or politician who tries to spin this and claim that Social Security is a "difficult" part of it or that in some way they're connected must be pilloried and run out of town on a rail.  They are lying and intending to bankrupt you and this nation.  They are not only violating their oath of office they are deliberately destroying both you and the country as a whole.

If the government will not enforce the law (specifically, 15 USC Chapter 1), break all the medical monopolies and slay these jackasses with criminal prosecution immediately, driving medical costs down by 80% so the cash flow statement returns to something resembling balance then the only peaceful option remaining for the public is a full-on General Strike to compel the government to do so -- right here, right now, today and forevermore until the government takes that action.

The truth of the nation from a fiscal perspective is simply this: If the medical monopolist crap is not broken now fiscal collapse at local, state and federal levels is a certainty.  There is absolutely no possible way out of this box through higher taxes, cost-shifting, economic "growth", more borrowing or even all of them at once.  "Hide the sausage" games just flat-out don't work.

Time's up.

View this entry with comments (opens new window)
 

2018-12-07 07:35 by Karl Denninger
in Federal Government , 345 references
[Comments enabled]  

So-cited the Daily Beast (which demands I let it run crazy-scam ads to view, so no linkey will be provided.)

The reference is to the debt at the federal level; Trump has been led to believe and has bought into the idea that "growth" can fix the problem.

He's not only wrong those telling him this are lying.  You need only look at the last fiscal year -- he got his "growth" but federal debt expanded at 6.2% of the economy, far beyond any rational target for GDP and also roughly double the actual realized GDP expansion.

Two exponentially-growing (that is, "x% per year" growth) things, where one exponent is larger than the other, will always blow up with the larger running away in a hockey-stick fashion.  This is trivially provable if you don't believe it in seconds using Excel or Google's Sheets.

It always happens -- exactly how quickly depends on the parameters, but that you will never get away with this is mathematical fact.

Sadly there is another fact in play, which is that the markets never let you actually hit the wall.  1929 was not the actual wall.  Neither was 2007.  Nor was 2000.  All three of these events occurred long before the actual mathematical wall was reached.  They happened because the market sussed out that all the game-playing was not going to be voluntarily curtailed, ever, and that the frauds embedded in that game-playing would continue forevermore.

In other words the inevitability of the outcome became apparent to the markets and it was that determination which, I remind you, is a purely psychological matter, that resulted in the crash.

If you remember the CEO of Citibank infamously said that while he knew the music would stop while it's playing you have to get up and dance.  The firm was nearly destroyed by doing this and many other banks were destroyed including Bear Stearns, Lehman, IndyMac, Washington Mutual, Wachovia and more.  General Motors only survived as a result of a massive, unfunded bailout by the US Government.  The market didn't go down "a bit" it lost roughly 2/3rds of it's value, a plunge only arrested when Congress literally threatened to legislate fraud and force it upon FASB, convincing them to allow fraud in accounting (specifically, asset "values") on a forward, permanent basis.

Absolutely nothing got actually fixed.  Nobody went to prison for said frauds.  The people who got reamed were the shareholders and, in some cases, bondholders.  They lost everything as a direct consequence of said frauds and there was no compensation for them.

There is a known, hard date out there of 2024.  I remind you from my previous article that by 2024 Medicare, which currently spends about $1,100 billion a year yet only takes in about $250 billion, will run out of Treasuries it can redeem with the US Treasury (and by doing so force the Treasury to issue same into the public market, since the US Treasury has no money and operates on a perpetual deficit.)  That this is going to happen, and when it does that Medicare will be short some 75% of what it is asked to pay, is a known fact.  That said event will occur approximately six years from now is also a known fact.  While the actual end date might move a year either direction or two that doesn't matter because once again the market never lets you actually hit the wall.

This specific problem is especially severe because unlike the housing market which was a few percent of the economy (and houses were not being sold at four times their value), and unlike the tech crash which was powered by a few dozen crazy stock market plays that had no real profit prospects this sector is 20% of the economy and the people over 65 really are spending the Medicare funds in hospitals, doctor offices and pharmacies.

It's not "loosey goosey" numbers on a screen as was the case in 1929 and 2000, and it's several times the size of the real economic impact from the housing mess.

There is no escaping this outcome -- a complete detonation of the federal budget and asset markets -- other than a dramatic and immediate reduction in the cost of health services and products.  Not "bending the curve", not tiny incremental changes worth a billion over 10 years or so (e.g. $100 million a year) but rather an across-the-board, immediate reduction in cost for everyone whether government or not in the health care space by about 80%!

In other words health care must be reset to be approximately 4% of the economy instead of the nearly-20% it is now and you cannot wait until the actual collapse in funding comes or you are going to kill at least ten million Americans when the checks bounce.

There are answers.  This sort of reduction in cost is not impossible and it doesn't mean throwing Granny down the stairs -- or in the hole.  However, it cannot happen if the collusive, monopolist practices now rampant are allowed to continue and are not met with proper sanction that has always existed under 100+ year old anti-trust law but that governments at the federal, state and local levels all refuse to enforce.

President Trump will not be "gone" before this all comes apart and destroys the economy and asset markets if he wins a second term.  He might manage to escape before it all goes to Hell should he be defeated in 2020 but even that is uncertain.  The problem with exponential explosions of this general sort is that very small changes in economic outcomes can accelerate the timeline dramatically because these timelines are always predicated on things continuing as they are -- that is, no recessions, no serious disruptions in the global economic environment and, quite-importantly, no wars that cut off resources or otherwise constrain commodities (like oil.)  For instance were we to have a recession in 2020 the odds of that causing an immediate acceleration such that Medicare blows up one or two years hence instead of four would be extremely high.  In turn the odds of the market deciding to not wait the two years to react would go to near-100% and what would otherwise be an ordinary market downturn and recession would likely turn into economic and market destruction worse than the 1930s.

No, Mr. President, you won't "not be here" when this happens.....

smiley

View this entry with comments (opens new window)
 

Why aren't we talking about this?

 DatePublic DebtIntergovernmentalTotal
 09/30//201614,173,423,516,895.825,400,021,197,040.9719,573,444,713,936.79
-09/30/201513,123,847,198,347.81 5,026,770,468,136.52 18,150,617,666,484.33
Purchasing Destruction 1,049,576,318,548.01373,250,728,904.451,422,827,047,452.46

Remember, the actual "public" deficit is the difference in borrowing between the end of the fiscal year and the beginning in debt held by the public.  The total increase in debt, including intergovernmental (mostly Social Security and Medicare) is the actual deficit and is exactly equal, on an arithmetic basis, to the destruction in your personal purchasing power that the government causes (or gain if the government runs a surplus.)

The actual deficit -- that is, the destruction in purchasing power the federal government caused last year, is the percentage of 1.423 trillion .vs. the total GDP of 18.450 trillion or approximately 7.7%.

That's right -- the government intentionally destroyed almost 8% of your paycheck and your savings last year, running a $1.423 trillion dollar budget deficit, which is roughly equal to the worst of the "great recession" when tax revenues went through the floor.

Today there is no such "tax shortfall" excuse. 

The breakdown of exactly where the ugly is coming from will be published next week.  I already know what is in there because I've been following the monthly treasury statements all fiscal year, but wish to report final "as tallied" facts -- and thus will have another post at that time.

Let me be clear: On the arithmetic if we do not stop this now within the next 4-5 years -- that is, within the next Presidential term -- our government will collapse, our economy will collapse, our health care system will collapse and both the stock and housing markets will collapse.  This is not politics, it's arithmetic.  And the worst part of it is that I am utterly certain that the "references" count, along with the "views" count on this article will both be a fraction of the politically-oriented articles I've recently posted.  That the real end of our way of life in America, a threat that is obvious, mathematically certain, not very far in the future and yet avoidable if we act now fails to garner any sort of serious attention is the real outrage folks.

View this entry with comments (opens new window)