"If corporate accountants used government rules for their financial statements, they’d be jailed. That’s why we rarely see the real number of the federal deficit—a terrifying $2.1 trillion last year." - Bruce Bartlett, Fiscal Times
You could call it creative accounting.. you might even call it out and out fraud ... but thew truth is that the 2010 Deficit Was $2.1 Trillion Not $1.29 Trillion - with a capital "T". But hey, what's $.81 Trillion among friends?
Bruce Bartlett writes:
The most important difference between the Financial Report and the federal budget is that the former calculates costs on an accrual basis, whereas the latter only measures cash flow. Thus if the federal government incurred a debt that would not be paid until some time in the future, that cost would not be part of the conventionally measured national debt. It would only add to the debt when cash had to be expended to cover the expense that had been incurred. It’s worth remembering that private corporations are required to use accrual accounting and corporate executives would be jailed for using the sort of accounting that the federal government routinely uses.(please read the rest here)
The unfunded liabilities of Social Security and Medicare aren’t the only ones left out of the national debt calculations. The federal government also owes federal employees and veterans future benefits of close to $6 trillion. The Financial Report also estimates more than $300 billion of future environmental cleanup costs and more than $600 billion of costs associated with loan guarantees, insurance commitments and liabilities related to Fannie Mae and Freddie Mac, the big housing agencies.
In principle, changes in the cost of long-term commitments should be included in the budget, as they would under accrual accounting. The Financial Report takes a stab at doing so and finds that it would have almost doubled last year’s budget deficit from $1.3 trillion to $2.1 trillion.
Of course, the government also has assets, but no one really knows what their value is because they are carried on the government’s books at historical cost. Since assets such as the millions of square miles of land owned by the government were acquired for nothing, they are implicitly valued at zero.
and while you wrap your mind around that ... you might be interested to know that the US Closed 2010 With $14,025,215,218,708 And 52 Cents In Debt! Repeat the US topped $14 Trillion in debt!
As a reminder the debt ceiling is $14,294,000,000,000. Which means at a run rate of $125 billion in net monthly issuance, the US may not even get to the end of March at the current burn rate. Which also means Congress better start the discussion on raising the debt ceiling as soon as February.
Some Republicans in the new Congress have said they'll seek to block an increase in the Debt Ceiling unless a plan is in place to significantly reduce federal spending and unfunded government liabilities on entitlement programs such as Social Security and Medicare.
White House economic adviser Austan Goolsbee warned yesterday that it would be "catastrophic" if the U.S. Government were to default on its financial obligations.
Will they raise the debt ceiling?
They need to balance the budget and cut spending.
Caution: Austerity budget ahead...
just remember the riots in Europe..
they might just come to a sanctuary city near you!