Author / Hoosier Econ

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Posts by Hoosier Econ

Located out of Central Indiana. Blogger of economics, politics and societal trends.
by Hoosier Econ

Social Security Disability Insurance Fund Will Be Depleted in 2016

Charles Blahous of the Manhattan Institutue recently reported on some findings from the July 28th Social Security Trustees annual report. Social Security and Medicare are two government programs that have been long embedded in government spending. These programs are political hot topics whenever they are suggested to be “reformed” or made more efficient, political dogma ensues. Changes for the most part of these programs are made to give MORE benefits to people and not a regression. I will take some information from Mr. Blahous write up which he did testify in front of Congress about and then turn to two other sources for completion of this summary.

The public must understand the breakdown of how Social Security functions when pertaining to funds

Social Security has two trust funds. Payments for retired workers as well as spouses, children and survivors are made from the Old-Age and Survivors (OASI) trust fund. Payments for disabled workers and their dependents are made from the Disability Insurance (DI) trust fund. It has become commonplace to refer to the two trust funds’ combined operations as though they were one fund. This nomenclature is convenient but not truly accurate. By law each of the two trust funds must separately have a positive balance to allow them to make benefit payments.

Here is big point for people to grasp about this trust fund. Many people who support Social Security at any cost claim the program has too by “law” go on forever no matter what funding issues arise. That is true to a point and here is that BIG point. Once funding for the SS Disability Insurance fund starts going in the red, payments can be greatly reduced “BY LAW”.

The trustees have been warning for several years (long before I became one) that Social Security is on an unsustainable financial trajectory. We have now moved from a long-term problem to an immediate one. The DI trust fund is currently projected to be depleted in two years, in the fourth quarter of 2016. At that point, unless the law is changed disability payments will drop suddenly by 19 percent.

I would suggest reading Charles Blahous article (A Guide to the 2014 Social Security Trustees Report) a few times and even take some time to ponder it. It is a very nice write up and one to keep on file for further events.

Social Security and Medicare produce reports and the federal government then puts together a summary(Status of the Social Security and Medicare Programs) of these two reports. Here are some highlights of the summary pertaining to just Social Security.

Neither Medicare nor Social Security can sustain projected long-run pro- gram costs in full under currently scheduled financing

Social Security and Medicare together accounted for 41 percent of Federal expenditures in fiscal year 2013

The Trustees project that this annual cash-flow deficit will average about $77 billion between 2014 and 2018 before rising steeply as income growth slows to its sustainable trend rate after the economic recovery is complete while the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.

In October 2013, “60 Minutes” reporter Steve Kroft did a segment called “Disability, USA”.  If you have not seen it, I suggest you take a look at the SS disability situation happening in America.

Final summation: For years many Austrian Economic students have talked about the Social Security situation. They are usually met with resistance by economic pundits who produce wild and complicated graphs that say everything is o.k. Problem with this belief is it defies reality. Real money is being given to real people. This program has real issues that cannot be delayed as the physics of debt take over.

by Hoosier Econ

2014 Indiana State Fair Attendance

Indianapolis WTHR-TV reporter Matt McCutheon reported on his Twitter account today the Indiana State Fair will top over 900,000 in total attendance this year. This would put it in the Top 5 of attendance records for the fair.

by Hoosier Econ

Year To Date Federal Government Deficit $460 Billion

The United States Treasury just released up to date tax revenue collection relating to 2014 fiscal government budget. 2014 government budget ends in September.
CSN News provides a more detailed analysis:

Inflation-adjusted federal tax revenues hit a record $2,469,178,000,000 for the first 10 months of the fiscal year this July, but the federal government still ran a $460,450,000,000 deficit during that time, according to the Monthly Treasury Statement.
After the current fiscal year, the second highest federal tax intake in the first 10 months of a fiscal year occurred in the first 10 months of fiscal 2007, when the government collected $2,432,115,460,000 in 2014 dollars – or $37,062,540,000 less than in the first 10 months of this fiscal year.

The total dollar amount already spent by the government stands at $2,929,628,000,000.

You can read the rest of the article here.

by Hoosier Econ

30% Drop in Soybean & Corn Prices?

Agricultural stocks have taken a beating just recently and one could speculate recent co mments/numbers0 could have this particular commodity market spooked.
The USDA just released numbers for Indiana and nationally on how yields will play out this fall for corn and soybeans. The plants them self are still in pollination stage, but each week gets us closer to the harvest. Here is what the USDA said via Hoosier Ag:

 In Tuesday’s USDA report, corn production is forecast at 14.0 billion bushels. Yields are expected to average 167.4 bushels per acre, up 8.6 bushels from 2013. Soybean production is forecast at a record 3.82 billion bushels, up 16 percent from last year with yields expected to average a record high 45.4 bushels per acre. Indiana corn yields are forecast to be above the national average.

Indiana is forecast to set a new record high corn yield at 179 bpa with an estimated state production of 1.05 billion bushels, the second year in a row the Hoosier state has produced over a billion bushels of corn. Hoosier soybean yields are forecast to equal last year’s level at 51 bpa which will equal 279 million bushels of production. Winter wheat yield is estimated at 73 bushels per acre, even with last year’s record high. Winter wheat production is forecast at 26.3 million bushels.

With that data coming out, Purdue Ag Economist Chris Hurt says profit margins will be squeezed this year at the annual crop report analysis program at the State Fair.

“The revenues will be down sharply this year; crop farmers’ incomes could fall 25-30 percent.” Hurt predicts that corn and soybean prices will continue to move lower as we approach harvest, “This report will not give us new lows; but, if the September and October reports show an increase in corn yields, we could see new low prices.” Hurt said if the National average yield tops 170 bpa, corn prices could dip as low as $3.20 a bushel.

Shuan Casteel, Purdue soybean specialist and Extension agronomist Dr. Bob Nielsen were also in attendence at the State Fair panel. They stated crops were ahead five year averages and that the crops still have 30-45 days of yield potential despite the cool weather.

by Hoosier Econ

The Nine Pound Gold Shirt

Sometimes in life it’s o.k. to splurge on clothes shopping. But one man did it in a big way and Economic Policy Journal lays out the details:

Pankaj Parakh owns a pure gold shirt worth about £127,000 (roughly $213,000).He had it custom-made for his 45th birthday. The shirt, made out of 18-22 carat gold, weighs more than four kilograms (nearly nine pounds). The gold itself is 18-22 carat purity, and there have been no other metals used. It is lined with a thin cloth for added comfort

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by Hoosier Econ

Indiana Schools Back in Session: Examination of Their Debt

Indiana public schools are swinging into full gear and with that, their financial books are starting to get published in the back pages of your local newspaper. Most of their financial information from a broad spectrum is posted on the state website and can be found in the Department of Education “School Financial Reports” portal.

The debt held by public education has swelled in recent years in municipalities. For numerous years, Indiana school boards were able to pass tax increases and spending agendas without much say from the public. Since 2008 school boards must get these items on a ballot for voters to decide.

Here are some listings of a handful of school corporations around the state and how much “total principal” they owe. Time period covered is July 1, 2012 to June 30, 2013:

Brownsburg $188 Million

Avon $236 Million

Indianapolis Public Schools $642 Million

South Madison Schools $69 Million

Greenwood Community $20 Million

Plainfield Community $127 Million

Greenfield-Central Com Schools $96 Million

Carmel Clay Schools $153 Million

Zionsville Community Schools $200 Million

Fort Wayne Community Schools $133 Million

Rochester Community $13 Million

Seymour Community Schools $22 Million

Vincennes Community $31 Million

Lake Station Community Schools $15 Million

Tell City-Troy Twp School Corp $24 Million

Fremont Community Schools $5 Million

Vigo County School $58 Million

by Hoosier Econ

Texas Ranch For Sale: $725 Million or Best Offer

Per Associated Press:

One of the largest ranches in the U.S. and an icon for Texas horse and cattlemen has been listed for $725 million, marking the end of a decades-long courtroom battle among the heirs of cattle baron W.T. Waggoner, who established the estate in 1923.

The estate includes the 510,000-acre ranch spread over six North Texas counties, with two main compounds, hundreds of homes, about 20 cowboy camps, hundreds of quarter-horses, thousands of heads of cattle, 1,200 oil wells and 30,000 acres of cultivated land, according to Dallas-based broker Bernie Uechtritz, who is handling the sale along with broker Sam Middleton of Lubbock.

I did a little calculating on what a 30 Year Mortgage would be on this property if you put a $30 Million dollar downpayment on it and secured a loan for 4.25%. Your monthly payments would be just a shade over $3.4 Million a month.

by Hoosier Econ

Los Angeles Zoning Code Complexity

I’m currently relaxing in Oxnard, CA so I’ve had mornings skimming over the LA Times newspaper. They actually have a good business section and the editorials are as expected. I caught an article from their 7/31 edition in business section titled “L.A. To Revamp Zoning Code”. Before I begin, this blog takes the position that America is over regulated on every level of government. Many of these regulations are becoming petty and overlapping with other rules from various government entities. This makes business expansion and even home building very expensive and time consuming.
L.A. has a zoning code now over 800 pages of rules and amendments to rules. In 1946, the book only had 86 pages. The city council is now on a mission to revamp the book so it is less confusing and expensive for development. In the article, the city recently passed an ordinance that required businesses to put bicycle racks 50 feet from the door of the business but it collided with the American with Disabilities Act law of “an easy path to a door without bicycles blocking the path”. As the L.A. Times stated, it left the businesses coming to the city council for yet another amendment added to change the rule. Here are some other examples from the article of what just this one city faces in zoning:

– 60% of the zoning laws were just for certain districts but must be enforced everywhere.
– Want to build a single family home? That zoning has 300 different variations of rules.
– Starbucks found out if you wanted to have a store open up before 7 a.m. it needed a special permit. The cost was around $30,000 and waiting six months just for a decision.
– If you’re a small business or not a financially well off person looking to build a home you are less likely to get through the maze of rules. The system is designed so you have to hire consultant company or lawyers to get what you want approved.

Zoning laws usually are approved considerably easy to get passed. L.A. city council has now stated it will “take years” to change the code. Before regular citizens get a say, the council will consult with the groups that more than likely benefitted from the complex system.

by Hoosier Econ

2014 Corn Harvest Depends on Next Sixty Days

While many midwest Americans have embraced the record breaking cool summer(Indiana coolest July since 1895) along with heavy rains, a lot of corn farmers are nervously awaiting the next sixty days in the pollination process of their corn harvest.

Early this month I blogged about Soybean/Corn numbers but more specifically this point

Heavy rains in the cornbelt in June(beginning of pollination) have mostly meant lower yields come harvest.

I even e-mailed an investor July 12th on the East Coast this point on the corn yields with all the rain and cool weather the area has received:

One corn follower said the very wet condition in the cornbelt occuring right when pollination takes off in June has always tilted towards lower yields in the last fifty years.

Now a few weeks later, Indiana Economic Digest published a story of farmers showing the wear of cool/wet weather affecting their corn crops. You can read the story here for full details but will quote some of it for quick reference.

Purdue University corn specialist Bob Nielsen said the cooler temperatures that delayed planting and have continued into the July growing season
“We just had way too much moisture here,” Sutton said. The result is variable heights in corn and depleted nitrogen. “The nitrogen deficiency causes the brown bottoms. … And, with less heat, the corn thinks it’s July 4th.” Sutton said a St. Louis, Missouri-based agronomist his family retained told them, “We have the worst crops in the nation.”

Lower yields than expected will ultimately drive up the price of corn. The pollination process of corn is a wait and see game. Last year ten days made the difference on record number corn/soybean harvest that developed in August. This year may prove a little later.

by Hoosier Econ

Indianapolis Colts Training Camp

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Anderson Herald Bulletin reported some economic numbers related to the Indianapolis Colts training camp. An event like this is hard to gauge on economic impact but they did have some financials:

Since the Colts training camp returned to Anderson in 2010, city officials and business leaders have said the estimated economic impact each year from the event is between $5 million and $6.5 million.

The camp does cost the city money:

Winkler said the city has also paid the NFL more than $559,740 between 2010 and 2014 to provide security at the camp. He said each year the city enters a contract with the NFL and Anderson University with each agreeing to pay a portion of the costs associated with the event.

At least $200,000 of the funds used to pay the NFL was in forgiven loan payments of $50,000 each, by the city, on behalf of Anderson University, Winkler said. The school had borrowed money from the city to pay for expenses related to the camp, he said.

The Colts also do not pay the city any money to hold the camp in Anderson.