<ARTICLE> Rules 'hiding' trillions in debt

silverharp

It would appear that the clock is ticking on how long the US can remain a world power, an interesting case study on how big gov. is the problem and not the solution





Rules 'hiding' trillions in debt - Liability $516,348 per U.S. household

By Dennis Cauchon - USA TODAY

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.

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.

Chad Stone, chief economist at the liberal Center on Budget and Policy Priorities, says it can be misleading to focus on the government's unfunded liabilities because Medicare's financial problems overwhelm the analysis.

"There is a shortfall in Medicare and Medicaid that is potentially explosive, but that is related to overall trends in health care spending," he says.

oscarBravo

silverharp, please add your own comments to this article, per the charter. This is a discussion group.

Gobán Saor

This is utterly fallacious - the federal government will be around for the foreseeable future and so does not have to meet future payments by making provision out of current revenue.

And, even if it did, it still only involves a transfer of resources from one set of US citizens to another set. It doesn't mean the country as a whole is on its uppers!

sovtek

SS and Medicare are not funded by income tax. They are funded by payroll taxes. While there is a projected shortfall there it isn't for 75 years and could easily be remedied by increasing the payroll tax to those that make more than $90k a year.
This sounds like more propaganda by the Rethuglicans in efforts to "reform" *cough* destroy *cough* SS and medicare.

Zambia

Americans live in a world of debt

http://www.maxedoutmovie.com/clips/trailer.html

We dont live too far out it ourselves ....