What's the real federal deficit?

BaliBabyDoc

Lifer
Jan 20, 2001
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Colored paper . . .
The federal government keeps two sets of books.

The set the government promotes to the public has a healthier bottom line: a $318 billion deficit in 2005.

The set the government doesn't talk about is the audited financial statement produced by the government's accountants following standard accounting rules. It reports a more ominous financial picture: a $760 billion deficit for 2005. If Social Security and Medicare were included ? as the board that sets accounting rules is considering ? the federal deficit would have been $3.5 trillion.
I'm inclined to agree that distant future outlays for SS/Medicare shouldn't be included. But the audited statement by Treasury is far closer to reality than what Bush (and Clinton before him) brags about.

Last year, the audited statement produced by the accountants said the government ran a deficit equal to $6,700 for every American household. The number given to the public put the deficit at $2,800 per household.
I do find it amazing that we pay people to lie to us.

"We're a bottom-line culture, and we've been hiding the bottom line from the American people," says Rep. Jim Cooper, D-Tenn., a former investment banker. "It's not fair to them, and it's delusional on our part."
Does this sound familiar . . . drug benefit no more than $400B over 10 years . . . really . . . no kidding.

But this is a bipartisan game . . .
The Clinton administration reported a surplus of $559 billion in its final four budget years. The audited numbers showed a deficit of $484 billion.

But Bushistas/GOP have taken it to another level.
The new Medicare prescription-drug benefit alone would have added $8 trillion to the government's audited deficit. That's the amount the government would need today, set aside and earning interest, to pay for the tens of trillions of dollars the benefit will cost in future years.

Standard accounting concepts say that $8 trillion should be reported as an expense. Combined with other new liabilities and operating losses, the government would have reported an $11 trillion deficit in 2004 ? about the size of the nation's entire economy.
Again, I'm not convinced that ALL future liabilities in SS/Medicare should be included since future taxpayers are expected to contribute to the programs and its undeniable that changes will be made to reduce the expense.

Having said that . . . it's also obvious that Bush's MBA has less utility than soggy toilet paper.

"The problem with cash accounting is that there's a tremendous opportunity for manipulation," says University of Texas accounting professor Michael Granof. "It's not just that you fool others. You end up fooling yourself, too."
We don't have to worry about that . . . we have 'honor and dignity' in the White House and a Congress above reproach . . . except for a few indictments.

Today, 18 of 24 departments and agencies produce annual reports certified by auditors. (The others, including the Defense Department, still have record-keeping troubles so severe that auditors refuse to certify the reliability of their books, according to the government's annual report.)
Hmm, they must have a former bidness person running that operation. Isn't DOD the sinkhole that's grown by over 100% since Bush took over?
 

Amplifier

Banned
Dec 25, 2004
3,143
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Did you know if we taxed the rich at 90% we'd have no debt too bad those cowards at congress (republicans) won't stand up to the fat cats who own them
 

LegendKiller

Lifer
Mar 5, 2001
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I have a hard time reconciling the two books. Considering that you have to get cash from somewhere to pay for the deficit, then where? We know that the deficit hasn't been increasing 3.5Tr per year, so where does it come from?
 

BaliBabyDoc

Lifer
Jan 20, 2001
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Originally posted by: Amplifier
Did you know if we taxed the rich at 90% we'd have no debt too bad those cowards at congress (republicans) won't stand up to the fat cats who own them

Uh, now that's a bit harsh. Granted, I believe the top tax rates used to be pretty high 50 years ago. Granted, in a better world (and a simpler tax code) we would just exempt a certain amount of income and then have a progressive (or flat) tax thereafter.

Aside from the Bush shenanigans with the tax code (and corporations/wealthy people that aren't paying their taxes) . . . our problem isn't with the revenue side. We need to spend less and come to terms with the unrealistic expectations built into future liabilities (Medicare/SS).
 

BaliBabyDoc

Lifer
Jan 20, 2001
10,737
0
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Originally posted by: LegendKiller
I have a hard time reconciling the two books. Considering that you have to get cash from somewhere to pay for the deficit, then where? We know that the deficit hasn't been increasing 3.5Tr per year, so where does it come from?

Well, I think it's closer to three books. Cash, accrual, and accrual with SS/Medicare. Cash is what Bushistas tout. Accordingly, as SS runs a $250B/yr surplus, Bush/GOP book that as income despite the fact it's actually a 'premium' of sorts for a future benefit. A benefit that's going to FAR exceed what's been put in. The same is true for Medicare. If you do a partial accrual with SS/Medicare, you would acknowledge that future benefits aren't really guaranteed and future taxpayers will be footing most of the bill.

But the real bad news occurs when you factor in changes in SS/Medicare. In essence, every single year the government books (and spends) the surplus . . . so that's a negative. Accordingly, the amount of money needed to cover future SS benefits is equal to $250B + whatever amount it takes to cover future benefits.

The horrific news occurs with Medicare b/c it will grow far faster than SS. Then in 2003 Bush/GOP decided to guarantee a fiscal collapse by adding more unfunded liabilities to the greatest unfunded liability we have.

Rep. Mike Conaway, R-Texas, a certified public accountant, says the numbers reported under accrual accounting give an accurate picture of the government's condition. "An old photographer's adage says, 'If you want a prettier picture, bring me a prettier face,' " he says.
 

senseamp

Lifer
Feb 5, 2006
35,787
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This is at the same time that any CEO cooking the books will be Sarboxed to PMITA prison for a very long time.
And of course Al Gore got bashed for his lockbox, when in fact it's just money set aside to pay for future benefits.
 

GroundedSailor

Platinum Member
Feb 18, 2001
2,502
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Originally posted by: senseamp
This is at the same time that any CEO cooking the books will be Sarboxed to PMITA prison for a very long time.
And of course Al Gore got bashed for his lockbox, when in fact it's just money set aside to pay for future benefits.

Given the way Bush/GOP are spending money like drunken sailors, with hindsight, the lockbox looks even better today.


 

BaliBabyDoc

Lifer
Jan 20, 2001
10,737
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Originally posted by: GroundedSailor
Originally posted by: senseamp
This is at the same time that any CEO cooking the books will be Sarboxed to PMITA prison for a very long time.
And of course Al Gore got bashed for his lockbox, when in fact it's just money set aside to pay for future benefits.

Given the way Bush/GOP are spending money like drunken sailors, with hindsight, the lockbox looks even better today.
Well let's not give to much praise to Gore. From a superficial standpoint, Gore's proposals were superior to the tax cut and spend policies of the Bush junta. But when it comes to practical long-term considerations, a Gore administration would still be compelled to make significant changes in SS/Medicare. And I don't mean plowing money into them unless you are talking about partial privatization.

I hate to say it . . . but part of the Bush team was on to something. If instead of tax cuts, people were 'encouraged' to divert part of FICA into personal retirement accounts +/- long-term care/healthcare insurance . . . then the future liabilities in SS and Medicare would fall dramatically.

Alternatively, we could just stick with the big government solution but make radical reforms to make it sustainable. Further, allow people to PAY to opt out; meaning each fiscal year the IRS would refund up to 10-30-50% of all FICA contributions. But if you opt out you can never access SS or Medicare.

I seriously doubt such proposals would have come from Gore.
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
1
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BBD,
To present fairly the financial condition of an entity one must consider, in this case, that the funds used to decrease the deficit do create a future liability (actually like a bank holding a savings account for you) and so that should be recognized but in the appropriate 'statement', IMO. The deficit, as you know, is simply like an income statement's losses and the accumulated deficits are short and long term liabilities. The issue is confused by including cash flow analysis - the SS and other inflows - to depict health rather than simply revenues less expenses.... operating deficit/loss..
EDIT:.. SSI inflows are not revenue actually... they are Prepaid Expenses/Liabilities and belong on the Balance Sheet offset by Accrued Liabilities which may create a net asset or liability.. depending.. Actuarial tables are use to determine liabilities for pensions etc all the time..

It would be fair to actually create all the typical financial statements normal entities generate and maybe even adjust the Balance Sheet to reflect the FMV of the Assets etc.
Americans can then see that besides all the submarines and land and all that good stuff that we own are the little issues we owe... I don't think we are bankrupt.. but neither do I think I can find the value or even identify most of the assets.. let alone the liabilties...
 

techs

Lifer
Sep 26, 2000
28,559
4
0
Hey, lets punch another 1 trillion deficit over 10 years by repealing the estate tax.
 

BaliBabyDoc

Lifer
Jan 20, 2001
10,737
0
0
Originally posted by: LunarRay
BBD,
To present fairly the financial condition of an entity one must consider, in this case, that the funds used to decrease the deficit do create a future liability (actually like a bank holding a savings account for you) and so that should be recognized but in the appropriate 'statement', IMO. The deficit, as you know, is simply like an income statement's losses and the accumulated deficits are short and long term liabilities. The issue is confused by including cash flow analysis - the SS and other inflows - to depict health rather than simply revenues less expenses.... operating deficit/loss..
EDIT:.. SSI inflows are not revenue actually... they are Prepaid Expenses/Liabilities and belong on the Balance Sheet offset by Accrued Liabilities which may create a net asset or liability.. depending.. Actuarial tables are use to determine liabilities for pensions etc all the time..

It would be fair to actually create all the typical financial statements normal entities generate and maybe even adjust the Balance Sheet to reflect the FMV of the Assets etc.
Americans can then see that besides all the submarines and land and all that good stuff that we own are the little issues we owe... I don't think we are bankrupt.. but neither do I think I can find the value or even identify most of the assets.. let alone the liabilties...

I agree with you in principle but here's the kicker . . . a lot of our assets are really liabilities. Our nuclear stockpile . . . largely a liability (maintenance). Submarines . . . largely a liability. It may be a good thing that DOD can't count. It would probably be depressing.

Federal lands are certainly an asset but allowing farmers to graze (and their cows crap everywhere), industry to remove minerals (and leave tailings in the rivers), and for Big Oil/Gas to remove the last vestiges of reserve energy (that's not coal) . . . diminishes that resource as well.

Certainly we aren't bankrupt but I'm inclined to say the general fiscal stewardship of this nation is morally bankrupt. Even current leadership would acknowledge that our behavior is not sustainable . . . as they add ever more to the problem. As a GenXer with very young kids, I'm leaving my options open. IMHO, it's going to get ugly. Not Indonesia ugly but there's going to be a lot of unhappy people in America . . . when the bucket gets too big/heavy to kick down the road.