The Real Size Of The Debt

You better sit down, because if you haven’t heard this before, it’ll knock the wind right out of you,

“The federal government recorded a $1.3 trillion loss last year — far more than the official $248 billion deficit — when corporate-style accounting standards are used, a USA TODAY analysis shows.

The loss reflects a continued deterioration in the finances of Social Security and government retirement programs for civil servants and military personnel. The loss — equal to $11,434 per household — is more than Americans paid in income taxes in 2006.

“We’re on an unsustainable path and doing a great disservice to future generations,” says Chris Chocola, a former Republican member of Congress from Indiana and corporate chief executive who is pushing for more accurate federal accounting.

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Modern accounting requires that corporations, state governments and local governments count expenses immediately when a transaction occurs, even if the payment will be made later.

The federal government does not follow the rule, so promises for Social Security and Medicare don’t show up when the government reports its financial condition.

Bottom line: Taxpayers are now on the hook for a record $59.1 trillion in liabilities, a 2.3% increase from 2006. That amount is equal to $516,348 for every U.S. household. By comparison, U.S. households owe an average of $112,043 for mortgages, car loans, credit cards and all other debt combined.

Unfunded promises made for Medicare, Social Security and federal retirement programs account for 85% of taxpayer liabilities. State and local government retirement plans account for much of the rest.

This hidden debt is the amount taxpayers would have to pay immediately to cover government’s financial obligations. Like a mortgage, it will cost more to repay the debt over time. Every U.S. household would have to pay about $31,000 a year to do so in 75 years.

The Financial Accounting Standards Advisory Board, which sets federal accounting standards, is considering requiring the government to adopt accounting rules similar to those for corporations. The change would move Social Security and Medicare onto the government’s income statement and balance sheet, instead of keeping them separate.

The White House and the Congressional Budget Office oppose the change, arguing that the programs are not true liabilities because government can cancel or cut them.”

Do you want to know why the “White House and the Congressional Budget Office” don’t want the real numbers used? Because those numbers would scare the American people to death and they’d demand changes when they realized what we’re doing is unsustainable.

That would force the politicians to start making unpleasant choices about Social Security, Medicare, pork, and the budget. Rather than do that, these pols would rather kick the can down the road and let someone else deal with it after they’re retired.

Look at what happened when Bush tried to reform Social Security. You had Democrats lying through their teeth and insisting that everything was hunky-dory while the Republicans were too scared that they’d be demagogued on the issue to fight really hard for change. Meanwhile, the Social Security program will start going into the red in about a decade and Medicare is a far bigger issue.

These spending issues are endemic to our political system, so much so that the politicians don’t even want people to know how much we’re overspending. That’s why I’m convinced that the only long-term fix for our spending woes is a Balanced Budget Amendment. Unless these politicians are required to keep the budget under control by the force of law, they will spend this country right into the ground one day — and when they do, they’ll find a way to blame the other guy — but that won’t put any more money in our kids’ pockets when they get the bill for the money we’ve squandered.

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