02

03/10

Charts the GAO Doesn’t Want you to See

20:10 by Administrator. Filed under: Whatever

by John Galt

March 2, 2010

The postponed 2009 Fiscal Year Financial Report of the United States was finally released this past Friday night with little fanfare and after a quick review, one could see why they really did not want to promote this report. The fiscal condition of the U.S. can best be described by one word: HORRID. Instead of just rehashing the same old statements you will hear on the MSM every day, I thought I would display some of the charts from the report and let them speak for themselves.

From this first chart it is easy to see that all of the fanfare last year about making government more efficient and proclaiming that costs will be brought into line is total political nonsense. The operating costs of our government have increased as the expansion into Euro-Socialism have accelerated yet the zipperheads in the House and Senate refuse to comment on or seriously attempt to fix the problem. This figure will accelerate even further because payroll tax with holding and the ability of Americans to pay taxes owed are deteriorating at a faster pace than the so-called expansion of the economy (see chart from ZeroHedge and his March 1st article “February 2010 Federal Tax Withholdings Plunge To Multiyear Low” ):

REPRINTED WITH PERMISSION of www.zerohedge.com

Thus it does not take much imagination to see that with long term wage stagnation, lower tax collections, and a potential case of long term unemployment and underemployment (U-6 Not Seasonally Adjusted) remaining well above 15% for years to come, it is safe to assume that the estimates that the GAO and government are providing are optimistic at best as issues which were once assigned to recessionary causes have now become chronic almost permanent fixtures.

The next chart ties the number of Social Security beneficiaries covered per 100 workers and in my opinion doing a back of the napkin calculation, it is about 10% too low now and will only progressively worsen as the time line moves forward. The assumptions made are for low inflation, unemployment under 7%, wages to increase at 2.1% annually and for the life expectancy to increase only slightly in the best case scenario. Other than the latter assumption as to which I will not comment as I am not a doctor, the other economic presumptions are at best a fantasy, at least unrealistic. In fact I would like to think that I am being conservative with the line I added to this graph and feel that we will see 50 beneficiaries per 100 workers within four years long before the projections of the GAO.

Another assumption made by the GAO was the utterly absurd calculation that the Expenditures for Social Security expenditures will not exceed taxes collected or “Income” by 2016. If the economic downturn continues with the middle and lower classes enduring reduced earnings as is the case at this time, then the crossover even will probably be in FY 2012, not 2016 which will have an immediate impact on the budget deficits as funds are shifted from the general fund to supplement the Social Security Trust Fund. This chart also makes the case for the Treasury and the administration to proceed with the seizure of IRA’s and 401K’s to purchase Treasuries under a new Social Security regime and buffer the losses or mask the outflow of funds to erase the crossover event, or mask it, in the near future.

The one chart they don’t want you to see but I tend to agree with is titled “Future Interest Costs Without Future Policy Changes” or Chart 9 within the big scheme of the report. I shall let it speak for itself but the numbers will not work if the bond vigilantes return and the yield curve steepens dramatically causing a faster more rapid increase in the cost of servicing the debt issued by the government. This is a drastic view of our future and unless we see the size and rate of expansion of our government contract rapidly, we will sooner, rather than later, see 30-50% of our GDP used for debt service. Let that sink in.

The nightmare which contradicts the statements and assumptions of the GAO are no better illustrated than their own chart. This chart is a list of all states and the buffer, or duration of funds available in their various unemployment insurance funds:

The years of benefit payments held in reserve for many states is now less than a year or zero as you can see from above. Not being satisfied with the information provided by the GAO, I checked out Center on Budget and Policy Priorities (CBPP) website which posted an article on February 25, 2010 entitled Recession Continues to Batter State Budgets; State Responses Could Slow Recovery where in Table 1 where the States with Mid-Year FY 2010 Budget Gaps were provided and the projected dollar amounts. When you overlay those states with projected gaps over the chart above, this is what you get:

While I openly admit that my markup of the chart is not pretty, the numbers are the point of the chart above. The numbers from the CBPP are fairly stark and with the decline of tax revenues in addition to declining earnings plus increases in bankruptcy and foreclosures, a lot of which are occurring in the states with deficits listed above, there is going to be a massive shortfall in the ability of the states to meet commitments to their citizens much less service the unemployment claims which are still averaging around 470,000 per week. This will not end well for the states unless the Federal government turns around and bails out those states in trouble and that will expand the budget deficit at the Federal level even further. The combined gap for FY 2010, mid-year, is now $37.7 billion and barring a miracle or liquidating state owned assets, some of those states listed in red above will be totally dependent on the Federal Government to bail them out or they face potential insolvency.

When you look at this final chart from the CBPP story, you begin to understand the severity of the state budget deficits in total, and this is without the start of the Municide or collapse of the Municipal Bond markets.

Get ready for a wild remaining nine months of 2010. And prepare for a massive change in those graphs in 2010 as the delusions used as statistical bases for their calculations shift drastically as the economic mirage called a recovery turns into sand in the champagne glasses of the elites in D.C.

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