A positive projection

I have speculated that with some minor tweaks, it might be possible to show that the debt is sustainable indefinitely. So here is a projection based on some more positive numbers. I am not going to show all of the numbers because formatting is such a pain in blogger, so I will just list my assumptions.

1. Start with the most recent CBO's estimate of the President's budget, available at http://www.cbo.gov/ftpdocs/121xx/doc12130/04-15-AnalysisPresidentsBudget.pdf All the numbers listed are in billions.

2. For revenue, I accept its estimates through 2012, but then assume a 5% increase thereafter. The 2012 amount is 2544, 2013 is 2671 through 2032 which is 6750.

3. For outlays, I accept its estimates through 2021, but then assume a 5% increase. The 2021 amount is 5756, and the 2032 amount is 9845.

4. I assume that the assets of the Federal Reserve can be used to offset the debt. I am estimating the balance on 9/30/2011 will be 2700 and that it will increase by 7% annually, so the 2032 amount will be 11,180.

Here are some of the lines:
2021: revenue 3947, outlays 5756, annual deficit 1809, total national debt 29163, Fed assets 5311, net national debt 23852
2032: revenue 6750, outlays 9845, annual deficit 3095, total national debt 56154, Fed assets 11180, net national debt 44975

By the way, at this rate, the national debt will first exceed $1 quadrillion dollars in 2089.

My conclusion from this thought exercise is that it is possible to increase the national debt indefinitely, even if the annual deficits never decrease below $1 trillion/year. What is important is that the outlays not increase by a greater percent than revenues.

The Fed can continue to monetize part of the debt to pay for it. Anything the Fed monetizes is free money because the interest paid on that portion goes back to the Treasury.

The biggest threat to the long-term sustainability of the system that I see at this point is that the Fed will monetize an excessive amount of debt and introduce hyperinflation this way. So I think it is as important to monitor the Fed's balance sheet as it is to monitor the national debt. The current numbers are available here: http://research.stlouisfed.org/fred2/series/BASE and the latest number for the monetary base is 2625, which is up more than 30% since January. (There is a minor difference between Federal Reserve assets and the Adjusted Monetary Base which I am ignoring for this calculation).

Anyways, good news. The apocalypse has been delayed indefinitely.

Update:  A $1 quadrillion national debt offset by a Fed balance sheet of $500 trillion seems unlikely, so I will call this a crisis in 2089.

Update 6/19/12:  I call this Model E-1.  I will have to think about this some more.  

Add quadrillion to the vernacular

A quadrillion is a very cool sounding number.

"Yesterday the Japanese Finance Ministry made a whopper of an announcement: in the year ending March 2013, total Japanese debt will surpass one quadrillion yen, or ¥1,086,000,000,000,000. So prepare to add quadrillion to the vernacular. At this exponential rate of increase quintillion will appear some time in 2015 and so on."
--http://www.zerohedge.com/news/%C2%A51086000000000000-quadrillion-debt-and-rising-and-whythe-%C2%A5-will-soon-be-lost-decade-or-two

In computer terms, a megabyte is one million bytes.  A gigabyte is one billion bytes. A terabyte is one trillion bytes.  What's next?  A Petabyte is one quadrillion bytes.

These no longer seem like impossibly big numbers.  Quadrillions and Petabytes are here.  A trillion dollars here, a trillion dollars there, pretty soon we are talking about real money.  Let's stay away from quintillions for now.

What is the first prime number bigger than 1 quadrillion?  1 quadrillion+37.  That is 1 followed by 13 zeros followed by 37.  It took less than 1 second to calculate.  What is the second one? 1 quadrillion+91.

So, if you accept the premise that the national debt never has to be paid, what does the size matter?  I previously calculated that we will hit the 1 quadrillion dollars in national debt by 2089.  Bring it.  We can handle it.

===================
See also:  http://jpkoning.blogspot.com/2013/04/the-growing-demand-for-larger-and.html
The DTCC settles over $1 quadrillion of trades each year.

On the smaller side of things, a "mill" is 1/1000 of a dollar.  A "millibit" is one-thousandth of a bitcoin, also known as a "millie".
A "pip" is a term used in foreign exchange and it is equal to 1/10,000 of the dollar or currency unit.  For example, the current value of the Euro in dollars is $1.2848.  It has 4 decimal places.  This is also called a "basis point" or a "bip".
A "drop" is one millionth of a currency unit, and is used only with ripples, a currency similar to bitcoin.  A millionth of a bitcoin is  "microbit", also called a "mickey".
A "satoshi" is one-hundred-millionth of a bitcoin.

In the old British sterling system, there were 20 shillings to the pound, 12 pence to a shilling, and 4 farthings to a penny.  Thus a farthing was 1/960 of a pound.  A "grano", used in Malta, was 1/3 of a farthing or 1/12 of a penny and thus 1/2880 of a pound.

Merck goes wild

Merck just got approval for a new drug from the FDA and its stock goes wild (up 6.5%).  This puts its market cap over $150 billion.  So I am going to add it my Global 30 list, which now has 31 stocks on it.  Here is the info for Merck.

Stock Symbol:  MRK
Headquarters City: Whitehouse Station, NJ (pop. 2,089)
Shares Outstanding: 2920M
Stock Price 9/30/2013:  $47.18
Market Cap 9/30/2013: 137,766
Stock Price 12/31/2013:  $50.05
Market Cap 12/310/2013: 146,146
Stock Price 1/13/2014: $53.12
Market Cap 1/13/2014:  155,110

List of Top Cities, version C1

I'm going to start a new list of top cities, from a Chinese perspective.  The ranking is strictly by GDP.  Each new version will gradually include more cities.  The number is the city's GDP in billions of yuan.

1. Tokyo-Yokohama ($1479) [9392]
2. Seoul-Incheon (23.6 million x $23,750 *6.35) [3559]
3. Osaka-Kobe ($418) [2654]
4. Nagoya ($329) [2089]
5. Shanghai [1717]
6. Singapore ($260 billion x 6.35) [ 1651]
7. Hong Kong ($243 billion x 6.35) [1545]
8. Beijing [1411]
9. Sydney ($213 ( [1353]
10. Fukuoka (175) [1111]
11. Taipei-Keelung (6.9 million x $25,000 *6.35) [1095]
12. Melbourne, Australia [1092]
13. Guangzhou (Canton) [1075]
14. Shenzhen [958]
15. Manila, Philippines ($149) [946]
16. Suzhou [923]
17. Tianjin [922]
18. Brisbane, Australia [870]
19. Chongqing [793]
20. Busan, South Korea [768]
21. Bangkok [756]
22. Perth, Australia [660]
23. Hangzhou [595]
24. Jakarta, Indonesia [584]
25. Wuxi [579]
26. Qingdao [567]
27. Foshan [565]
28. Wuhan [557]
29. Chengdu [555]
30. Sapporo, Japan (83) [527]
31. Ningbo [516]
32. Dalian [516]
33. Nanjing [513]
34. Shenyang [502]

Source: http://en.wikipedia.org/wiki/List_of_Chinese_municipalities_and_prefecture-level_cities_by_GDP

Projected Nominal GDP through 2100.

 This is the projected US Nominal GDP through 2100.  This comes from the Social Security Trustees report at: https://www.ssa.gov/OACT/TR/2023/VI_G2_OASDHI_GDP.html, using the low-cost estimates.  I interpolated and rounded the numbers.  These show growth of about 5.5% per year.

Year	GDP
2024	28,800
2025	30,700
2026	32,500
2027	34,400
2028	36,200
2029	38,200
2030	40,300
2031	42,500
2032	44,800
2033	47,200
2034	49,700
2035	52,400
2036	55,200
2037	58,100
2038	61,200
2039	64,500
2040	67,900
2041	71,600
2042	75,400
2043	79,500
2044	83,700
2045	88,200
2046	93,100
2047	98,200
2048	103,500
2049	109,200
2050	115,100
2051	121,500
2052	128,100
2053	135,200
2054	142,600
2055	150,500
2056	158,900
2057	167,700
2058	177,000
2059	186,800
2060	196,800
2061	207,500
2062	218,800
2063	230,700
2064	243,200
2065	256,800
2066	270,700
2067	285,300
2068	300,800
2069	317,000
2070	334,500
2071	352,800
2072	372,000
2073	392,300
2074	413,700
2075	436,100
2076	460,000
2077	485,200
2078	511,800
2079	539,900
2080	570,600
2081	602,600
2082	636,400
2083	672,200
2084	709,900
2085	749,500
2086	791,600
2087	836,000
2088	882,900
2089	932,500
2090	985,600
2091	1,040,700
2092	1,098,900
2093	1,160,400
2094	1,225,300
2095	1,292,800
2096	1,364,000
2097	1,439,100
2098	1,518,300
2099	1,602,000
2100	1,690,100

Most models use percent of GDP, so these are the numbers to use.

========

Update:  Here are the 2024 similar numbers: https://www.ssa.gov/OACT/TR/2024/VI_G2_OASDHI_GDP.html .  These numbers are slightly different than those above.

This shows Intermediate, Low-cost, and High-cost numbers.  The low-cost numbers have the highest GDP and I adopt this assumption because there is no way the system can survive otherwise.  We need a higher GDP so the debt-to-GDP ratio is lower.

Social Security Projections through 2095

The Social Security expenditures come from https://www.ssa.gov/OACT/TR/2019/lr6g8.html .

The Social Security trust fund will be depleted in 2035, so it isn't really possible to project anything after that.  But it is fun to make wild speculative guesses about what the future will be like.

Year	Soc Sec	GDP
2019	1,058	21,485
2020	1,118	22,523
2021	1,188	23,558
2022	1,265	24,616
2023	1,348	25,735
2024	1,438	26,907
2025	1,533	28,109
2026	1,634	29,349
2027	1,742	30,637
2028	1,857	31,972
2029	1,973	33,363
2030	2,093	34,800
2031	2,218	36,304
2032	2,349	37,873
2033	2,484	39,501
2034	2,622	41,199
2035	2,764	42,963
2036	2,911	44,793
2037	3,067	46,700
2038	3,230	48,689
2039	3,399	50,772
2040	3,575	52,965
2041	3,757	55,249
2042	3,946	57,640
2043	4,146	60,160
2044	4,357	62,794
2045	4,581	65,548
2046	4,819	68,433
2047	5,073	71,444
2048	5,345	74,580
2049	5,632	77,863
2050	5,939	81,297
2051	6,267	84,859
2052	6,617	88,573
2053	6,991	92,459
2054	7,388	96,499
2055	7,813	100,694
2056	8,265	105,057
2057	8,747	109,603
2058	9,260	114,336
2059	9,804	119,258
2060	10,379	124,381
2061	10,986	129,714
2062	11,627	135,263
2063	12,304	141,040
2064	13,018	147,056
2065	13,773	153,328
2066	14,573	159,869
2067	15,422	166,693
2068	16,321	173,816
2069	17,273	181,256
2070	18,282	189,023
2071	19,346	197,138
2072	20,465	205,621
2073	21,646	214,491
2074	22,892	223,773
2075	24,202	233,480
2076	25,572	243,631
2077	27,004	254,245
2078	28,497	265,335
2079	30,050	276,917
2080	31,674	289,008
2081	33,381	301,643
2082	35,181	314,834
2083	37,080	328,601
2084	39,086	342,964
2085	41,214	357,936
2086	43,486	373,534
2087	45,922	389,785
2088	48,537	406,707
2089	51,354	424,320
2090	54,389	442,655
2091	57,655	461,750
2092	61,160	481,628
2093	64,912	502,329
2094	68,916	523,883
2095	73,175	546,331

Social Security Projects through 2095 per the 2020 SS Trustees Report

The Social Security cost projections come https://www.ssa.gov/OACT/TR/2020/lr6g8.html using the low-cost assumptions.

The GDP projections come from https://www.ssa.gov/OACT/TR/2020/lr6g4.html using the low-cost assumptions.

Note that we have to use the low-cost assumptions because neither the intermediate-cost or high-cost assumptions are sustainable past 2035. ( Read the footnote b: The combined OASI and DI Trust Funds become depleted in 2035 under the intermediate assumptions and in 2031 under the high-cost assumptions, so estimates for later years are not shown.)  Also note that the GDP projections under the low-cost assumptions are much higher than those under the other two, and this is more likely because of inflation.

Compare these numbers to the similar forecast made last year and they are very different - much higher.  For example, last years forecast shows GDP of 34,800 in 2030 and this shows 39,249.  Last year shows GDP of 52,965 in 2040 and this shows 65,841.

I am going to use the GDP numbers here for my next long-range forecast.

Year	Soc Sec	GDP
2020	1,111	22,716
2021	1,178	24,162
2022	1,247	25,603
2023	1,323	27,045
2024	1,404	28,565
2025	1,491	30,153
2026	1,584	31,804
2027	1,683	33,538
2028	1,788	35,356
2029	1,899	37,255
2030	2,009	39,249
2031	2,123	41,355
2032	2,241	43,569
2033	2,363	45,906
2034	2,488	48,350
2035	2,616	50,909
2036	2,748	53,597
2037	2,887	56,427
2038	3,031	59,396
2039	3,180	62,526
2040	3,335	65,841
2041	3,495	69,350
2042	3,662	73,064
2043	3,837	77,005
2044	4,020	81,186
2045	4,214	85,611
2046	4,419	90,297
2047	4,638	95,262
2048	4,872	100,505
2049	5,120	106,056
2050	5,384	111,916
2051	5,665	118,105
2052	5,965	124,627
2053	6,284	131,506
2054	6,622	138,746
2055	6,982	146,363
2056	7,364	154,383
2057	7,769	162,817
2058	8,200	171,693
2059	8,654	181,029
2060	9,135	190,854
2061	9,641	201,192
2062	10,173	212,058
2063	10,733	223,487
2064	11,322	235,516
2065	11,943	248,184
2066	12,598	261,534
2067	13,290	275,611
2068	14,021	290,463
2069	14,793	306,140
2070	15,609	322,704
2071	16,466	340,186
2072	17,365	358,682
2073	18,310	378,240
2074	19,302	398,937
2075	20,341	420,844
2076	21,425	444,033
2077	22,557	468,567
2078	23,734	494,533
2079	25,252	521,983
2080	26,770	550,991
2081	28,288	581,637
2082	29,806	614,000
2083	31,324	648,179
2084	32,842	684,244
2085	34,360	722,271
2086	35,878	762,347
2087	37,396	804,553
2088	38,913	848,978
2089	40,965	895,727
2090	43,170	944,908
2091	45,541	996,646
2092	48,088	1,051,084
2093	50,818	1,108,358
2094	53,741	1,168,613
2095	56,861	1,232,021

I don't know why these don't go out through 2100 but that is the data I have.

Medicare Projected Expenditures Through 2093

This source of this is a zip file linked from here: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/index.html
The name of the specific spreadsheet is: "HI and SMI Incurred Expenditures as a Percentage of the Gross Domestic Product.xls".  I rounded everything to the nearest billion. This doesn't include Medicaid.  Here are the projected expenditures through 2093.  So in 2093, the GDP will be $502 trillion and total Medicare expenditures will be $32 trillion.  If we make it that far as a civilization. 

As a percent of GDP, this rises from 3.73% in 2019 to 4.08% in 2022, 5.11% in 2029, and 5.91% in 2039.  Then it increases very slowly to 6.0% in 2046, and hits 6.4% in 2072 and goes up to 6.48% in 2078 and stops increasing there.  I don't know why costs are rising so high now and will stop rising as much after 2040.

The Medicare trust fund will run out in 2026, so Medicare expenditures really should be capped at about 4% of GDP after that point.  We can't really project after 2026, so everything after that point is science fiction.  But I like big irrelevant numbers far out in the future so here you go.

	Total
Year	Medicare	GDP
2019	801	21,485
2020	858	22,523
2021	928	23,558
2022	1,004	24,616
2023	1,083	25,735
2024	1,169	26,907
2025	1,259	28,109
2026	1,354	29,349
2027	1,452	30,637
2028	1,591	31,972
2029	1,703	33,363
2030	1,818	34,800
2031	1,936	36,304
2032	2,058	37,873
2033	2,183	39,501
2034	2,313	41,199
2035	2,447	42,963
2036	2,585	44,793
2037	2,723	46,700
2038	2,860	48,689
2039	2,999	50,772
2040	3,142	52,965
2041	3,288	55,249
2042	3,436	57,640
2043	3,591	60,160
2044	3,753	62,794
2045	3,927	65,548
2046	4,108	68,433
2047	4,295	71,444
2048	4,488	74,580
2049	4,689	77,863
2050	4,901	81,297
2051	5,122	84,859
2052	5,351	88,573
2053	5,592	92,459
2054	5,847	96,499
2055	6,117	100,694
2056	6,402	105,057
2057	6,698	109,603
2058	7,005	114,336
2059	7,324	119,258
2060	7,658	124,381
2061	8,008	129,714
2062	8,374	135,263
2063	8,758	141,040
2064	9,162	147,056
2065	9,589	153,328
2066	10,032	159,869
2067	10,492	166,693
2068	10,973	173,816
2069	11,478	181,256
2070	12,008	189,023
2071	12,565	197,138
2072	13,150	205,621
2073	13,765	214,491
2074	14,403	223,773
2075	15,062	233,480
2076	15,744	243,631
2077	16,449	254,245
2078	17,183	265,335
2079	17,945	276,917
2080	18,738	289,008
2081	19,560	301,643
2082	20,408	314,834
2083	21,283	328,601
2084	22,189	342,964
2085	23,134	357,936
2086	24,120	373,534
2087	25,152	389,785
2088	26,237	406,707
2089	27,382	424,320
2090	28,584	442,655
2091	29,842	461,750
2092	31,158	481,628
2093	32,532	502,329