Do I obsess over the wave of entitlement spending that’s about to hit this country? Am I too worried about an economy hobbled by skyrocketing tax rates and unimaginable deficits? Is anybody listening besides Will?
Well Scrivener has a long post about the accounting tricks the government uses to hide the incomprehensible debt we’re up against: “You thought the 2005 federal budget deficit was $319 billion? How about more than $3 trillion, by the accounting rules the private sector uses.”
The US government's budget deficit for 2005 was $319 billion, as officially reported by the Treasury. That's the number in the newspapers that everyone editorializes and op-eds about, representing the increase in the government's net liabilities, basically in the form of additional government debt issued during the year. And it's been reported as good news, being down from the $412 billion of 2004.In other words, forget about the $319 budget deficit – that’s pocket change. If the government used accrual accounting (like real companies) to calculate the current value of promised entitlements such as Social Security and Medicare, we’re already in a multi-trillion hole that cannot be gapped by any imaginable combination of taxation or asset seizure without sending the entire U.S. economy to the bottom of the ocean.
But wait ... the Treasury has published another analysis on its web site, in its 2005 Financial Report of the United States Government, that gives a very different number for the increase in its net liabilities, albeit one that receives very little publicity: more than $3 trillion.
There – [deep breath] – I feel better already. Read the whole post.
3 comments:
OK, if we elected to use GAAP accounting standards, our annual budget deficit might appear higher. On the other hand, we would also have to produce a balance sheet that shows all the government's assets and liabilities. Now, the focus is on debt and future liabilities, but assets such as government-owned land, buildings, property etc are ignored.
"we would also have to produce a balance sheet that shows all the government's assets and liabilities"
1) Not for purposes of the income statement.
2) The Treasury does publish a balance sheet. And with $46 trillion (and growing) of fiscal liabilities on it, the government better hope it gets a pretty good price when it sells the Grand Canyon to Disney.
If we were using GAAP standards, I do not see how you could have a meaningful income statement without producing a balance sheet as well. Nor, do I see how the Federal government could have liabilities counted without also counting its assets.
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