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CBO’s 2015 Long-Term Projections for Social Security: Additional Information

CBO’s 2015 Long-Term Projections for Social Security: Additional Information

The Social Security Policy Options, 2015 was not the only report released by CBO yesterday. You have this one filling out the details in the Long-Term Budget Outlook

Haven’t read this one either. So you all get first shot at framing the debate! Go get ’em Tigers!

CBO Releases 2014 Long Term Budget Outlook

    2014 Long Term Budget Outlook (pdf 64pp)

While we are still waiting on the 2014 Social Security Report we do have today the release of CBO’s annual Budget Outlook which among other parts does include a chapter on Social Security. I plan to extract and post some Tables from it but in the meantime people can have their own look and draw their own conclusions. Key pieces:

p. 10 Table 1-1. Projected Spending and Revenues in Selected Years Under CBO’s Extended Baseline

Note that under CBO’s 10 year window (the one used to score legislation) non-interest spending is projected to drop from 19.1% of GDP to 18.8%. Or essentially flat, and BTW this includes spending on Social Security and Medicare. On the other hand TOTAL spending INCLUDING interest is projected to increase from 20.4% to 22.1%. With the entire difference being made up by interest payments rising from 1.3% of GDP to 3.3%. I for one would be interested in seeing and discussing the interest rate assumptions that go into that increase, perhaps it just represents some reversion of 10 year Bond Rates to the mean. Please chime in in comments.

p. 25-44 Chapter 2: The Long-Term Outlook for Major Federal Health Care Programs

Lots and lots of good stuff here. I haven’t even started sampling yet. Bon appetit!

p. 45-51 Chapter 3: The Long-Term Outlook for Social Security

Ditto. And my first stop at this particular buffet table, with reports in the next hours or days. My first focus might well be on: Table 3-1. Financial Measures for Social Security Under CBO’s Extended Baseline on p. 50. Note that while the main text does highlight the need for an “immediate and permanent increase of 4.0%” this is based on the assumption that despite all the uncertainties in the projections that we need to address the 75 year actuarial gap in one gulp. But an inspection of Table 3-1 shows that the actuarial gap for the first twenty five years is just 2.1% of payroll or 0.7% of GDP. Which might suggest to some that an plan to address the first 25 years IN the first 25 years by implementing something like the Northwest Plan’s phased in FICA increases while putting in contingency plans for actions in the decades that follow that might be more reasonable and prudent than trying to pre-fund a retirement insurance reserve 75 years in advance.

But let me turn this over to you all.

Deficits, Debt, Debt Subject to the Limit, Off Budget, Trust Fund: Building your 2013 Toolkit

All of the terms in the post title have at least two usages, some of which map upon to common sense ideas from business or household budgeting, some not. Unfortunately the usages that don’t tend to be those used in federal budget reporting, and the result is untold confusion. Now one way out would be to listen to me. Then again the relevant line on my CV under ‘Budget Reporting’ reads ‘Some Guy’, ‘U of Intertoobz’. So really the only way out is to start to build your own Budget, Debt and Deficit Toolkit. And this post is intended to give you a start using sources provided by the official scorekeepers of such things: the U.S. Treasury, the Congressional Budget Office (CBO), the President’s Office of Management and Budget (OMB) and the Joint Committee on Taxation (JCT).

First stop is the U.S. Treasury Department’s Bureau of Public Debt and their web application Debt to the Penny. This handy application allows you to track Total Public Debt and its two components Debt Held by the Public and Intragovernmental Holdings to the literal penny as of the close of the daily books the last business day but one. That is if you check the site on Tuesday it will give you final numbers for Friday. And a search today gave me the results for Monday the 31st (since Tuesday was a Federal Holiday) with Total Public Debt of $16,432,730,050,569.12 . This number is almost exactly the same as Debt Subject to the Limit differing only in the last seven or eight digits, which change so fast that you wouldn’t be able to see the difference. Debt Subject to the Limit is set by Congress and under current law is $16.394 trillion. With the result shown in the following official graph Debt Subject to the Limit Graph which shows total Public Debt Subject to the Limit (dark blue) passing through the Limit (orange) on the 31st.

Without comment (we are just building a toolkit here) we can move from Debt to Deficit. Here things get more complicated but probably the simplest tool available to us from official sources is found in CBOs annual The Budget and Economic Outlook: Fiscal Years 2012 to 2022 and the literal top line numbers from that is Summary Table 1 (click to embiggen)

Note that in this Summary table the bolded words Deficit (-) or Surplus unmodified by any adjective are unequivocably the sum of ‘On-budget’ and ‘Off-budget’ surplus/deficit. This isn’t the only usage of ‘deficit’ in CBO reporting, and in a weird twist of terminology is NOT the same as what they call ‘primary deficit’, but it is a fair equivalent to what both CBO and the MSM term ‘THE deficit’. For example take a standard news story from just today FY2011 Federal Deficit = $1,299,000,000,000 or just a minor update of the figure from the Table.

I’ll flesh out some of the implications of this in Comments and in later posts but will leave with two points. One almost the entirety of the ‘Off budget’ surplus of $67 billion is the result of an increase in assets of the Social Security Trust Fund. It is NOT a measure of cash flow nor does cash flow measure into it. Two the claim that ‘Social Security doesn’t contribute to the deficit’ is not quite right. It can and does contribute to the bottom line. But in either positive (surplus) or negative (deficit) directions. And in 2011 a cash flow negative Social Security Trust Fund ran a surplus for the purposes of THE federal deficit as defined.

More tools and more discussion later.

The CBO Wants to Discuss Healthcare and the Deficit?

The CBO Wants to Discuss Healthcare and the Deficit?
(from run75411)

Someone struck a nerve, “The Lady Doth Protest Too Much: CBO Director Asks for A Chat . . .”. Yves Smith at Naked Capitalism received an interesting email after a voice mail from the Associate Director of Communications for the CBO:

Greetings, Susan.

I am following up on my voicemail to see if we can arrange a time either today or sometime this week for you to speak with our director, Doug Elmendorf. He wanted to speak with you about your blog post “Fed Budgetary Experts Demolish CBO Health Models, the Lynch Pin of Budget Hysteria” that appeared Sunday on Naked Capitalism regarding CBO.

I am copying Brianne Hutchinson, Doug’s executive assistant, who will work with you to find a convenient time for the call. You can reach Brianne by e-mail or directly at: 202-226-2700.
We look forward to hearing back from you at your convenience.

Kind regards,
Deborah Kilroe
Associate Director for Communications
Congressional Budget Office
2nd and D Streets, SW
Washington, DC 20515

Recently, Dan posted some of my earlier conversation with Yves and other participants on her post’s thread “Healthcare Spending Growth in the US” at Naked Capitalism . Yves’s post pointed to a recent paper completed by Glen Follette and Louise Sheiner examining and challenging the CBO analysis of healthcare costs as a percentage of GDP An Examination of Health-Spending Growth in the US. Simplified, what the study is found Healthcare growth as a percentage of GDP is sustainable at 1% which is precisely what Obama and even Romney used in their limiting factor for healthcare costs.

Read more at   Health spending growth in the US  at Angry Bear.