Real U.S. shortfall: $4.6 trillion in red

'Taxing 100% of all wages, salaries, corporate profits would not eliminate a deficit of this magnitude'

December 17, 2006

By Jerome R. Corsi

The real 2006 federal budget deficit was $4.6 trillion, not a previously reported $248.2 billion, according to the 2006 Financial Report of the United States Government as released by the Treasury Department Friday.

"The 2006 federal budget deficit of $4.6 trillion is $1.1 trillion more than the 2005 federal budget deficit," econometrician John Williams, who publishes the website Shadow Government Statistics, told WND. "The Bush administration is in an untenable situation with a budget deficit this dramatic. Taxing 100 percent of all wages, salaries, and corporate profits would not eliminate a deficit of this magnitude, and cutting Social Security and Medicare spending is politically impossible."

In his subscription newsletter, Williams comments that the GAAP accounting numbers reported in the 2006 Treasury report show that, "the actual deficit number was nearly 19-times the size of the gimmicked 'official' deficit for 2006 of $248 billion. Total obligations were 4.2-times annual U.S. gross domestic product (GDP)."

The difference between the $248 billion "official" budget deficit numbers and the $4.6 trillion budget deficit reported in the 2006 Financial Report of the United States Government is that the official budget deficit is calculated on a cash basis, where all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur.

The calculations in the 2006 Financial Report of the United States Government are calculated on a GAAP basis ("Generally Accepted Accounting Practices") that includes year-for-year changes in the net present value of unfunded liabilities in social insurance programs such as Social Security and Medicare.

Under cash accounting, the government makes no provision for future Social Security and Medicare benefits in the year in which those benefits accrue.

"Truthfully," Williams points out, "there is no Social Security 'lock-box.' There are no funds held in reserve today for Social Security and Medicare obligations that are earned each year. It's only a matter of time until the public realizes that the government is truly bankrupt and no taxes are being held in reserve to pay in the future the Social Security and Medicare benefits taxpayers are earning today."

(see link for diagram)

Calculations from the 2006 Financial Report of the United States Government also show that the GAAP negative net worth of the federal government has increased to $53.1 trillion, while the total federal obligations under GAAP accounting now total $54.6 trillion.

"The Treasury is right in that Social Security and Medicare must be shown as liabilities on the federal balance sheet in the year they accrue," Williams argues. "To do otherwise is irresponsible, nothing more than an attempt to hide the painful truth from the American public. The public has a right to know just how bad off the federal government budget deficit situation really is, especially since the situation is rapidly spinning out of control."

"The federal government is bankrupt," Williams explained to WND. "In a post-Enron world, if the federal government were a corporation such as General Motors, the president and senior Treasury officers would be in federal penitentiary."

In a letter included in the 2006 Financial Report of the United States Government, David M. Walker, the comptroller general of the United States, commented on the $53 trillion federal government GAAP accounted negative net worth by noting, "This translates to a current burden of about $170,000 per American or approximately $440,000 per American household."

Remarkably, the U.S. Government Accountability Office refused to certify or render an opinion on the consolidated financial statements contained in the 2006 Financial Report of the United States Government, noting serious financial management problems at the Department of Defense, the federal government's inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies, and the federal government's ineffective process for preparing the consolidated financial statements.

In his letter, David Walker commented that until these financial reporting problems were resolved within the federal government, the problems outlined in the audit report "will continue to have adverse implications for the federal government and American taxpayers."

"That's an understatement," Williams told WND.

"What the comptroller of the United States is telling us is that as bad as a $4.6 trillion federal budget deficit and a $53.1 trillion GAAP negative net worth are today, the situation with the Bush administration federal budget deficit might even be worse yet if the government’s overall bad accounting procedures could be fixed. With truly accurate GAAP reporting by the various administrative agencies, the 2006 financial report of the federal government would have shown even larger deficits and a larger negative net worth, hard as that may be to imagine."

http://www.wnd.com/news/article.asp?ARTICLE_ID=53413

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"All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident." - Schopenhauer

This article is lying about the numbers.

I am no fan of Bush, and consider him a horrible President.

But I would like to see the forumla they used to arrive at 4.6 Trillion.

My guess is that they are counting future obligations in this years budget which is mathmatically dishonest.

Do you actually believe that the government is going to spend 6.6 Trillion $ this year? Roughly half of our GDP?

Read the article again. He explains exactly how he's making his calculations.

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"All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident." - Schopenhauer

http://www.gao.gov/financial/fy2006/fy06cgstatement.pdf

What you ahve to understand is cash vs accrual accounting.

Imagine your own financial health. Suppose you have an income of $8000 a month. Suppose you go out and get a large mortgage, you end up with a monthly payment of $4000. You have payments of taxes of $2000 a month. You have food and other neccesaties of $2000 a month. At this point your "breaking even". However if you also need to save for retirement, so you promise yourself you will put $250 a month in an IRA, but don't and instead promise to put in $500 next month. And you also go out and rack up $5,000 in credit card debt for the month.

In a cash system, you never spent the $250 on the IRA and the credit card bill does not come until next month, so income - expenses means you are still breaking even.

In an accrual system, your income is the same, but your debt is increased by the $250 you borrowed, and the $5,000 borrowed from the charge card company. So you end up with a $5,250 negative cash flow for the month.

So which is more accurate of your financial health, the one that says you are breaking even for the month, or the one that takes them into account.

What this report says is:

So basically this report is saying that by passing a large drug benefit and other liabilities and not providing any addition income for them, the future financial health of this country looks bleak. That if you take our projected revenue and our projected liabilities, the country has increased our deficit by $4 trillion this year alone and by $30 trillion since Bush took office (A 150% increase in 6 years)

Just this year, the government took a $2 trillion surplus in social security taxes and medicare taxes and instead of setting them aside to pay for the benefits of those who paid the taxes, they were spent on general spending, without a single mention of it in the deficit or debt numbers. So in the future, when there is a know social security shortfall, all of the surplus funds to cover that shortfall will be spent.

This is about as smart as having a million dollar income. Knowing for a fact that you will need to support yourself in retirement. Knowing that social security will pay you a tiny tiny income, that will only let you survive at the poverty level. And then not putting a dime away to save for retirement, in fact not only spending everything, but borrowing even more. And if someone says anything to you, you say you are fine because you paid your bills THIS month, ignoring your increasing debt and looming retirement.

But still it is astonishing.

So many people think the Bush administration's legacy is going to be based on what happens in Iraq and I think otherwise -- when the bill for this debt comes due, it's going to cripple the US. The US will no longer be a superpower simply because GW Bush and the Republicans will have mortgaged our future back to the ice age. And lord forbid if countries like China or India decided to convert their financial holdings from dollars to euros. The dollar will crash like skylab and the debt we now owe will balloon exponentially.

Do I hate George W. Bush? Yes. Do I have a very specific reason why? Yes. It's not blind antagonism without basis. George W. Bush has done more harm to the United States than probably any other president, hands down. I hope he's alive when the chickens come home to roost so we can string his bony butt up to the nearest tree and leave him to be crow snack.

For me there is no question that W' s legacy will be the financial burden he leaves future generations. They will revile his very name. I don't think Iraq will have any lasting impact at all, no matter what happens there. The cost of being there will, however.

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I wasn't born with enough middle fingers.

I think I read somewhere that he is the only guy to actually lose money during a war.

So the 4 trillion mark was considering future obligations.

Once you get older you will realize that our government is very bad at making future predictions.

In recent history, when Clinton took office, most people thought we could NEVER pay down the debt. At the end of his term, we were trying to figure out what to do with all the "future" surpluses.

Now thanks to Bush's drunken spending spree (Thanks Republican Congress!) those surpluses have evaporated.

And like many false prophets before you , you are claiming fiscal calamity.

While Bush and the Republicans have been god awful at managing our government coffers, they have not increased the defict by 4.6 trillion. That is taking into consideration this single years budget and projecting it way into the future, of which none of us has any clue what will happen.

Well you are kinda right that predicting next years deficit or tax revenue is not very accurate. However, there are some basics here that are just too big and looming to get brushed under the rug with, "they can't predict"

The first is that there is a large population surge. It is called the baby boomers. In 10 years, they will start to retire. In 20 years there will be more retirees then ever before and a smaller workforce than there is today. This just means that the "surplus" in the social security taxes will inevitably become "deficits" unless benefits are cut or taxes raised. This is not some mystery prediction, this is just plain and simple accuarial tables. So the $2 trillion a year that flows out of social security to offset our real deficit will reverse and the country will need to supplement social security to the tume of trillions a year.

Secondly. There was a huge medicare drug benefit passed. This was passed without any funding mechanism. Add to that the prediction that health care costs will continue to rise faster than inflation, and add to that the surge in elderly baby boomers and voila, there is a recipe for massive government obligations for medicare and medicaid costs. These costs spiraling out of control are far more certain that the prediction of next years deficits.

So don't brush under the rug the dire scenario that is unfolding in 10 years. It is a pyramid scheme and when the top of the pyramid get all the baby boomers and the smaller workforce tries to support them, things WILL be crashing down. That is what there numbers show.

HD, your $2 trillion number HAS to be wrong. The entire FY 2006 federal budget was $2.5 trillion, and that included a $390 billion deficit. So for your number to be correct, nearly the entire federal budget would have to be funded by raiding Social Security.

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Man up.