The truth about the U.S. budget deficit: It is 13x worse than you think By James Pethokoukis
| Dec 22, 2010 14:45 EST
Uncle Sam runs his books like he’s operating a hot
dog stand rather than a $14 trillion economic superpower.
It’s cash in (revenues), cash out (spending), forget
about the future costs of Social Security and Medicare.
But what if government bean counters acted like they worked
for USA Inc., instead? The numbers would come out just a
bit differently, accordingly to a little noticed Treasury
Department report that didn’t escape the notice of
my Reuters colleagues:
1. The Financial Report of the United
States, which applies corporate-style accrual accounting
methods to Washington, showed the government’s liabilities
exceeded assets by $13.473 trillion. That compared with
a $11.456 trillion gap a year earlier. Unlike the normal
measurement of government intake of receipts against cash
outlays, accrual accounting measures costs such as interest
on the debt and federal benefits payable when they are incurred,
not when funds are actually disbursed.
2. The report was instituted under former Treasury Secretary
Paul O’Neill, the first Treasury secretary in the
George W. Bush administration, to illustrate the mounting
liabilities of government entitlement programs like Medicare,
Medicaid and Social Security.
3. The government’s net operating cost, or deficit,
in the report grew to $2.080 trillion for the year ended
September 30 from $1.253 trillion the prior year as spending
and liabilities increased for social programs. Actual
and anticipated revenues were roughly unchanged.
4. The cash budget deficit narrowed in fiscal 2010 to
$1.294 trillion from $1.417 trillion in 2009. But the
$858 billion tax cut extension package enacted last week
is expected to keep the deficit well above the $1 trillion
mark for another year.
5. Among key differences between the operating deficit
and the cash deficit were sharp increases in costs accrued
for veterans’ compensation, government and military
employee benefits and anticipated losses at mortgage finance
giants Fannie Mae and Freddie Mac.
6. The report said the present value of future net expenditures
for those now eligible to participate in these programs
over the next 75 years declined to $43.058 trillion from
$52.145 trillion a year ago — a change attributed
to the enactment of health-care reform legislation aimed
at boosting coverage and limiting long-term cost growth.
The overall projection, including for those under 15 years
of age and not yet born, is much rosier, with the 75-year
projected cost falling to $30.857 trillion from last year’s
projection of $43.878 trillion. The report noted, however,
that there was “uncertainty about whether the projected
reductions in health care cost growth will be fully achieved.”