No Runny Eggs

The repository of one hard-boiled egg from the south suburbs of Milwaukee, Wisconsin (and the occassional guest-blogger). The ramblings within may or may not offend, shock and awe you, but they are what I (or my guest-bloggers) think.

Archive for June 24th, 2010

So Obama is coming to town to talk economy

by @ 19:26. Filed under Economy, Politics - National.

The word from WisPolitics is that President Obama will be coming to a to-be-disclosed location in southeast Wisconsin on June 30 to talk about the economy. The lines are now open for suggestions on where he could hold that talk.

My choice – the being-torn-down former Delphi plant at Howell and Drexel in Oak Creek.

The Social Security Crater – Disability Insurance edition

by @ 18:08. Filed under Social Security crater.

I know; the Trustees report is due out in a few days, but there’s some things that won’t wait until then. This time, I’ll focus specifically on the Disability Insurance (DI) portion of the matter. If you don’t want to wade through the whole post, the Cliff’s Notes version is that the DI “Trust” Fund suffered its first negative April since the effects of the previous major Social Security overhaul took full effect in 1987, and that it appears even the high-cost estimate in last year’s Trustees report was optimistic, with the DI fund now looking to be exhausted by the end of 2015 instead of by the end of 2016 in the 2009 high-cost estimate and by the end of 2020 in the intermediate estimate.

Before I get to the heart of the matter, I first need to do two months’ worth of housekeeping. In April, when just about everybody with a tax bill settles up and those who make quarterly estimated payments do so in the greatest of numbers, the combined Old-Age and Survivors/Disability Insurance (OASDI) funds took in $76,672 million, including $138 million of interest, and had expenses of $58,948 million for a gross increase of $17,724 million (or 23.12% of gross income), and a primary (cash) increase of $17,586 million (or 22.98% of ex-interest/net receipts). That pushed the 12-month primary deficit to $18,732 million, and dropped the 12-month gross surplus to $99,599 million (the first sub-$100,000 million 12-month gross surplus since 10/1997-9/1998).

In absolute terms, it’s the worst primary April performance since 1999 (with a $17,506 million increase on $49,810 million of tax revenue) and the worst gross April performance since 1998 (with a $15,502 million increase on $46,804 million in gross revenue). In percentage terms, that’s the worst April since monthly records were made available in 1987.

May didn’t show any real improvement over recent months, with the combined funds posting a combined $5,087 million gross/$5,177 primary loss on $53,859 million in gross receipts ($90 million in interest) and $58,946 million in outgo. The 12-month primary deficit grew to $21,987 million, and the 12-month gross surplus shrunk to $96,268 million.

This is not the first time since 1987 that the DI Fund faced imminent exhaustion. Indeed, in 1994, it came within 2 years of running out of Treasury securities to draw upon. The fix back then was to transfer the majority of the November 1994 tax revenue from the Old-Age and Survivors Insurance (OASI) Fund and increase the portion of the FICA/SECA tax that went into the DI Fund. That fix, which worked back then because the OASI Fund was running in the black, won’t work this time because, outside the “taxation” months of January and April, the OASI Fund has been running a primary deficit since July 2009.

Specifically to April, even in April 1994, the DI Fund ran a monthly surplus of $492 million ($473 million net) on $3,722 million of receipts ($19 million of interest) and $3,230 million of outgo. Now, the DI Fund has run 13 months of consecutive monthly primary deficits (through May), with the only monthly overall surpluses coming as a result of the semi-annual crediting of interest in June and December. The latest 12-month overall deficit (6/2009-5/2010) was $17,167 million, over 8.3% of the end-of-May fund value of $194,355 million.

That leads me to the bad news on the end of the DI “Trust” Fund. I decided to plug some numbers into the spreadsheet to see just how fast the fund would cease to exist. I assumed that tax revenues would, for the rest of 2010, continue to lag behind 2009’s by just under 5.2% (as they have for the first 5 months), then increase by 5.3% (actually a bit higher than the 1996-2006 annual average of 5.234% for the total FICA/SECA tax). I also assumed that outgo would increase by the 5.464% that it went up for the first 5 months in 2010 versus the first 5 months of 2009 (significantly lower than the 1996-2006 annual average of 7.613%), even though 2010’s increase is solely due to the increased number of those drawing from Social Security, and that the interest rate would be at 5% (a bit higher than the current weighted average of 4.880% and significantly higher than the 2.875% new bonds/certificates of indebtedness earn).

With a starting point of $194,355 million in the DI “Trust” Fund at the end of May 2010, and assumptions that are actually favorable to the longevity of the “Trust” Fund, here are the projected DI “Trust” Fund balances at the end of each calendar year:

December 2010 – $178,728 million (projected to be the first “interest” month with an monthly overall deficit, with June 2010 having the only monthly overall surplus of 2010)
December 2011 – $151,653 million (again with June 2011 having the only monthly overall surplus of 2011)
December 2012 – $118,899 million (with June 2012 having the only monthly overall surplus of 2012, and June 2012 also having the last monthly overall surplus in this scenario)
December 2013 – $83,281 million
December 2014 – $43,428 million
December 2015 – EXHAUSTED (November 2015 would see a DI fund balance of $4,839 million)

Even if I were to assume the 5.3% tax growth beginning in June 2010 instead of January 2011, it doesn’t get much better. The DI “Trust” Fund barely makes it into 2017 before it disappears.

As a reminder, under current law, at the point the DI fund is exhausted, benefits would have to be cut by the percentage the tax revenues don’t meet demand. No, it can’t even tap into the OASI “Trust” Fund to avoid average benefit cuts of over 25%.

Revisions/extensions (7:05 pm 7/2/2010) – Partly because the Social Security Administration missed their delayed deadline for the annual report, and partly because I had to adjust my outgo assumptions for the OASI “Trust” Fund estimates, I have re-run the numbers using the increases anticipated in the “Intermediate” and “High-Cost” scenarios in the 2009 Trustees Report.

Since the Intermediate scenario assumes that the cost of running the DI portion of Social Security rises slower than the 5.464% it went up in the first 5 months of 2010, the DI “Trust” Fund makes it to December 2016 before being exhausted. Further, unlike the “base” scenario outlined above, the DI operations would be able to pay out the entirety of the scheduled payments for a couple Aprils after fund exhaustion.

The bad news is the “High-Cost” scenario assumes the cost of running the DI portion of Social Security rises even faster than my assumption. Plugging that back into the spreadsheet yields fund exhaustion in July 2015.

Poll-a-copia: End of June edition

by @ 10:45. Filed under Politics - Wisconsin.

Rasmussen Reports released its monthly look-in at the Senate and governor’s races, both taken June 21. The news isn’t good for the Democrats, despite President Obama once again having a significantly higher approval rating in Wisconsin (49% approve/51% disapprove/Approval Index -13) than nationally (45% approve/55% disapprove/Approval Index -15), and the Democrat Party of Wisconsin convention happening between the May and June surveys.

First, Ron Johnson halved Russ Feingold’s insignificant May lead, and now trails 46% to 45%. Feingold’s smears and distortions aren’t exactly working, as Johnson’s favorables are now at 36% approve/30% disapprove/”Passion” Index +8, compared to 32% approve/25% disapprove/”Passion” Index +6, while Feingold’s favorables dipped to 52% favorable (down 1 point from May)/45% unfavorable (up 1 point from May)/”Passion” Index of 0 (down 6 points from May).

Meanwhile, Dave Westlake has made some hay, and is far closer than he’s ever been, trailing 47%-41%. The news isn’t all good for Westlake, because his unfavorables went up dramatically from 26% overall to 32% overall, with the “Passion” Index slipping from -3 to -4.

Over in the governor’s race, somebody had better put a notice on a milk carton for Tom Barrett. He has dropped to an 8-point deficit against both Scott Walker (49%-41%) and Mark Neumann (47%-39%). That 8-point lead by Neumann is his largest, with Walker’s 49% tying his highest percentage total (previously done in February, when he led Barrett 49%-40%) and Neumann’s 47% setting a new high.

One thing I wish Rasmussen did polling for was the primary election. The Walker campaign thoughtfully included some of the internals in a comparison between Walker and Neumann, and it shows a hard road for Neumann. Among the four categories of voters generally considered to be participants in the Republican primary, “Republicans” (note for the out-of-state crowd, there is no party registration, but one cannot vote in more than one party’s primary), independents, conservatives, and Tea Party, Walker is viewed significantly more favorably than Neumann. Among the Tea Party crowd, the Walker split is 86% favorable/8% unfavorable while the Neumann split is 71% favorable/19% unfavorable. Among conservatives, the Walker split is 79% favorable/14% unfavorable while the Neumann split is 64% favorable/22% unfavorable. Among independents, the Walker split is 58% favorable/24% unfavorable while the Neumann split is 51% favorable/30% unfavorable. Among Republicans, the Walker split is 86% favorable/11% unfavorable while the Neumann split is 70% favorable/20% unfavorable.

Unless Neumann is counting on a significant Democrat/liberal cross-over, or a major gaffe by Walker, I don’t see how he gets the nomination.

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