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Daily Digest 1/25 - IL Budget Fix Faces Long Odds, Debt Projected to Grow by $8.6T Over Next Decade

Wednesday, January 25, 2017, 9:39 AM

Economy

Far-reaching Illinois budget fix faces long odds

The bipartisan budget omnibus, which faces significant political hurdles, would raise income taxes by a third, borrow $7 billion to winnow down a record-setting pile of unpaid bills and open Chicago for the first time to legalized casino gambling.

Despite Reforms, San Diego City and County Pension Funds Are Billions Short

San Diego county and city pension funds have nearly $7 billion less in the bank than they need to cover benefits already earned by current and former employees, a deficit that’s risen 90 percent in just two years, new reports show.

Tax On Rich Contentious Part Of The New Budget (NY)

The state is facing a $3.5 billion deficit, and Governor Cuomo wants to add a billion dollars to the state’s public schools. He also wants to offer free tuition at public colleges for families making under $125,000 a year. He says continuing the tax surcharge is the simplest way to finance all that. “Frankly we don’t have the resources to lose the millionaires’ revenue now,” Cuomo said.

Doubek: Illinois needs a grassroots protest like Women’s March

But to summarize, according to independent budget experts Richard Dye and David Merriman at the University of Illinois’ Institute of Government and Public Affairs:

Illinois will have a $13 billion budget deficit by the end of the fiscal year in June.

It will have $14 billion deficits for the next five years before jumping dramatically to $23 billion by 2027

It has $10 billion in overdue bills and $174 billion in pension and health care debt for public workers.

Puerto Rico Creditors Open Checkbooks in Debt Negotiations

With $70 billion in bond debt, crippling out-migration and high unemployment, Puerto Rico is in the midst of a financial crisis that has led it to seek concessions from creditors. Last week, departing Treasury Secretary Jacob Lew warned that Puerto Rico may be unable to renew contracts with health care providers without financial relief before April.

A $90 Billion Debt Wave Shows Cracks in U.S. Property Boom

A $90 billion wave of maturing commercial mortgages, leftover debt from the 2007 lending boom, is laying bare the weak links in the U.S. real estate market. It’s getting harder for landlords who rely on borrowed cash to find new loans to pay off the old ones, leading to forecasts for higher delinquencies.

Federal Debt Projected to Grow by $8.6 Trillion Over Next Decade

After seven years of fitful declines, the federal budget deficit is projected to begin swelling again this decade, adding $8.6 trillion to the federal debt over the next 10 years, according to projections from the nonpartisan Congressional Budget Office that reveal the strain that the government’s debt will have on the economy as President Trump embarks on plans to slash taxes and ramp up spending.

China’s central bank ‘playing dangerous game’ to prop up yuan

The country's forex reserves have shrunk by almost a $1 trillion since June 2014 as the central bank has sought to prevent a large fall in the yuan against the U.S. ­dollar.

Vanguard to Deutsche AM See Sub-Zero Bond Yields Persisting

Vanguard Group says the euro zone’s sluggish economy, where policy makers are barely halfway to reaching their inflation target, means monetary easing will persist, and sub-zero bond yields with it. Deutsche Asset Management predicts rates on benchmark German two-year notes will climb about 0.2 percentage point in 2017 -- just twice the advance in the past month and keeping them well below the zero threshold.

Gold & Silver

Click to read the PM Daily Market Commentary: 1/24/17

Provided daily by the Peak Prosperity Gold & Silver Group

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

11 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4239
Japan government:fiscal targets slip further as tax revenue fall

 

Britain's national debt poised to hit £1.7trillion - with interest ...

Daily Mail-15 hours ago
Britain's ballooning national debt rose by £250million a day last year – leaving it just shy of £1.7trillion. Figures from the Office for National Statistics yesterday ...

Japan government: fiscal targets slip further as tax revenue falls

Yahoo Finance - ‎6 hours ago‎
The forecasts, released by the Cabinet Office, show the government is falling behind two important fiscal discipline targets that were intended to eliminate the primary deficit, which excludes debt servicing costs and new bond sales. Chances for a ...

Pension clock continues to tick, unfunded liability tops $74B (Pa.)

ABC27 - ‎16 hours ago‎
Secondly, McGinnis said, is put the state on a 20-year untouchable payment plan to pay off that pension debt, all $74 billion of it. “It's not gonna be the best-testing medicine to be sure, but this approach will be 100-percent effective for what ails ...

Indian households have record gold hoard of Rs 24000 tonnes ...

Financial Express-15 hours ago
Similarly, Indian jewellery exports could touch $40 billion mark by 2020, from the current ... To curb gold imports to control a runaway current account deficit, the ...

 

Helix's picture
Helix
Status: Bronze Member (Offline)
Joined: Sep 20 2008
Posts: 82
Social Security

In the article "Federal Debt Projected to Grow by Nearly $10 Trillion Over Next Decade", prospective White House budget director Mick Mulvaney is quoted as opining that raising the eligibility age for Social Security may be needed.

A few years back, I projected my total expected social security benefit vs. the total amount that I and my various employers contributed, all expressed in today's dollars.  I found that the two numbers were virtually  identical.  That is, if I lived to the standard life expectancy, I would receive very nearly exactly what I contributed. 

Now I'm not sure whether my case is typical or not.  If it is, however, I can't see where raising the eligibility age would make any difference over the long run.  The benefit over the years when I am receiving it is the same (assuming average longevity) whether I start taking the benefit at 62, 66, or 70.

So in my case, I have to conclude that the discussion about "raising the eligibility age" is a canard, and is really just cover for a stealth reduction of benefits.  It will be interesting to see how this subterfuge is carried out.  Now I understand that a reduction in benefits may be needed, but I don't see how an increase in the age of eligibility will do that.  YMMV.

newsbuoy's picture
newsbuoy
Status: Gold Member (Offline)
Joined: Dec 10 2013
Posts: 325
What Do You Get...?

What do you get when you turn the three E's on their side?

EEE

MMM or

Mendacity, Malevolence, Mayhem.

Coming at ya like a big bad choo choo

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 2039
Brought to you by the same people ....

... who explained the full 19 Muslim Men 9/11 myth just 3 days after the attack.  The place where we learned that kerosene fires melt steal and that having buildings fly apart in small piece is perfectly natural.

Why would anyone doubt their veracity?

White House Denies Authenticity Of Leaked Executive Order To Reopen CIA "Black Site" Prisons

Earlier today, the New York Times published a 3-page draft of an executive order, allegedly penned by the Trump administration, entitled "Detention and Interrogation of Enemy Combatants."  According to the NYT, which "obtained" the document from an anonymous source, the executive order seeks to, among other things, reopen overseas CIA "black site" prisons that Obama ordered closed in 2009.

So the NYT is about as close as you can get to the official propaganda mouthpiece of the Neocon Oligarchy.  (Foreign Affairs is more the internal debating society of this group.)  This group of self-identified elite work under the stratification principles of Leo Strauss and Niccolo Machiavelli.  Paraphrasing and summarizing:

1.   A superior class of persons, the philosopher-elite, has the responsibility to lead the vulgar masses, by deception.

2.  The elite must create myths that motivate and guide the masses.

3.  Myths are effective when they establish a clear boundary between good and evil and mobilize the masses against the evil one.

The creation of the "Trump is Evil" story is in full swing.

Unfortunately, Mr Trump does not seem to have the tact or skill to defuse this effort of painting him as the next Hitler.

efarmer.ny's picture
efarmer.ny
Status: Bronze Member (Offline)
Joined: Jan 7 2012
Posts: 63
SSI Revisited

Helix (#2 above) said

A few years back, I projected my total expected social security benefit vs. the total amount that I and my various employers contributed, all expressed in today's dollars.  I found that the two numbers were virtually  identical.  That is, if I lived to the standard life expectancy, I would receive very nearly exactly what I contributed.

Now, I'm not an expert on Social Security. But remember that some of your contributions get siphoned off to the Disability Insurance Trust Fund to support those who have contributed but can do so no longer.

My 9th grade history teacher made us question the solvency of Social Security way back over 30 years ago. So personally, I have never expected to receive everything back.

Quercus bicolor's picture
Quercus bicolor
Status: Gold Member (Offline)
Joined: Mar 19 2008
Posts: 470
Interesting Book

Has anyone read Surviving the 21st Century by Julian Cribb?  I saw it for sale here at the American Meteorological Society annual meeting among a host of books on climate change (and other meteorological topics).  I'm considering purchasing it for the plane ride home.  I'd be interested in your thoughts about the books.

Pandabonium's picture
Pandabonium
Status: Bronze Member (Offline)
Joined: Aug 30 2008
Posts: 88
Interesting Book

Quercus bicolor - I haven't read the book yet, but am looking forward to it.  Julian Cribb is one of the founders of sciencealert.com and if you search his name on YouTube you will find many videos of him speaking on various topics that are addressed in this book.

Thanks for bringing the book to my attention.  By the way, there are many Quercus acuta at the Shinto shrines in my area.  Majestic trees.

 

Uncletommy's picture
Uncletommy
Status: Platinum Member (Offline)
Joined: May 3 2014
Posts: 635
Another one for the shelf?

There are more of these books finding their way onto the shelves in recent years. Chris Patten’s and Randy Epping’s books on the challenge of the 21st century mirror the subject matter and tone. While geared, IMHO, to a younger crowd who are starting to see the light, it does give one a realistic hope that there are things you can do to minimize the eventual effects of what’s coming. While they don’t leave the same gasoline tinged, metallic after taste in your mouth that the Long Emergency provides, it does a fair job as a primer as to what is coming. The “Three E’s” are pretty hard to escape and Prosper, I think, does a more comprehensive job in providing better preparation suggestions. My archaic, 20th century viewpoint still has me questioning Thorium, LENR, renewables, etc., and may be because I’m old fashioned and share a “Kunstler-esque” view of the world. Fossil fuels are going to be with us for quite a long time; however, not as long as the climb up to the peak. Art Berman has a more in depth opinion of where things are headed. Given the shorter term, “fossil-centric” philosophy of Mr. Trump and Mr. Tillerson, coupled with an increasing world population, I think the” writing on the wall” is “staring us in the face”. Worth the time for those wanting a bit more substance.

http://www.artberman.com/blog/

TechGuy's picture
TechGuy
Status: Gold Member (Offline)
Joined: Oct 13 2008
Posts: 453
SS Funds

"Now, I'm not an expert on Social Security. But remember that some of your contributions get siphoned off to the Disability Insurance Trust Fund to support those who have contributed but can do so no longer."

100% of SS gets siphoned off. Any excess after outlays, goes into the general gov't fund, which is used for everyday gov't spending. The issue with gov't budgeting forcasts,is that the always include the SS Trust fund as if it was a surplus and not a liability. I believe since 2008, SS has been bouncing on the border when outlays exceed SS revenue. The gov't has been increasing SS revenue by raising the SS cap every year, and I think the cap is nearly doubled since 2000. However, I believe raising the cap has reached its limit, as fewer and fewer americans have the high salaries that exceed the cap. For 2017 the SS cap is now at $127K and only a small number of americans make above $100K. Future increases will not generate much new revenue simply becuase few people make more than the current cap. 

My understanding is that there is a bill to increase the SS tax rate from 6.2% to 7.4% (and the increase is matched on the employer side). FWIW, in reality, the employee pays the full 12.4% for SS, as employers include it for budgeting new employees. If there was no Employer contribution, your salary would be 6.2% higher. Its possible that Congress might try to hide the increase by dumping the entire increase on the employers side. But employers will react by cutting something from your compensation (ie higher health insurance premiums, lower bonuses, less vaction time, lower wage increases, or even wage decreases).

"My 9th grade history teacher made us question the solvency of Social Security way back over 30 years ago. So personally, I have never expected to receive everything back."

Don't expect anything back from SS. If you're born after 1959, don't expect to ever recieve a dime (once told to me by an adminstrator in SS adminstration back in 1990's). Like Hilary, the SSA has a public and private position. They've know about the democraphic problems since the 1970's but will never inform the public, since it would certianly trigger protests and a kick out a lot of encombents in Washington.

I suspect that the gov't will simply turn to printing money to handle SS outlays when time runs out and they have no options left. For the past 5 or 6 years, the SS crisis has been abled to be be postponed as boomers opted to work beyond retirement age in order to pay off debt/mortgage. However I think workers in the 70's will start to face health challenges that will force them into retirement even if they are not ready. Currently about 10K to 11K boomers retire each day, but I expect that in the not so distant future, this will increas to 14K to 15K per day, and its going make it much difficult for the gov't to keep up with outlays. Also Boomers can opt to collect SS while the continue to work.

We can see that its not just SS that is running into problems, but most public and private pensions that are grossly underfunded. To make matters worse, many public pensions excluded gov't workers from SS and are entirely dependent on state or a local gov't pension. Unlike the Federal gov't, state and local gov'ts can't print money. I am sure there will be a lot of very unhappy state & local workers that are near retirement, discover there retirement age suddenly and continuous gets increase so they can never retire, or existing retirees collecting pension start to see significant decreases in there monthly checks.

I fear that in the future we will face the "perfect" debt stom: unfunded gov't entitlements, insolvent pensions, insolvent local & state gov'ts, insolvent companies that borrowed heavy to support stock buybacks, energy and other strategic resource shortages caused by depletion, lack of appropriate skill sets for younger workers (ie majored in liberal arts with no practical skill set). Society as put itself on a one way track to the mother of all crisises.

 

reflector's picture
reflector
Status: Gold Member (Offline)
Joined: Aug 20 2011
Posts: 279
prepping gone mainstream

i was listening to KQED (public radio) during a long drive today and their funding drive came on, one of their thank-you gifts was basically a bug-out bag, with food, water, flashlight, blanket, emergency radio:

https://www.kqed.org/controller/pledge?action=catalogue&id=18391&type=item

just anecdotal evidence, of course, but i get the impression more and more people are prepping and being concerned about the future, almost like animals that sense when an earthquake is coming.

Julian Cribb's picture
Julian Cribb
Status: Member (Offline)
Joined: Feb 21 2017
Posts: 1
Surviving C21

Dear Quercus bicolor -

If you haven't already made the purchase, I;d be happy to provide you with a review e-copy of the book. Just email me at [email protected]

best wishes

Julian

 

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