The Federal Government's Fraudulent Accounting and The Debt Pit It Has Thrown Us Into

Interesting analysis from USA Today, as reported in the May 24, 2012 issue of Newsmax. The newspaper makes the assertion that the Federal government severely underreports the amount of deficit spending that the political class reports on every year, masking the fact that the Federal government is running up future liabilities that are not being financed with today's taxes and spending.

These liabilities will result in future retirees probably never receiving the future financial and medical support that the current members of the political class are promising, i.e. today's political class is writing checks that the Federal government will not be able to cover in the future.


But first let's look at what the Federal government reports as our annual spending deficits (double click on the graph for a bigger picture):

Ever since Obama became President, our annual Federal government spending deficit has been easily over $1 TRILLION a year. 2012 is not on the graph but credible current estimates put this year's deficit well over a TRILLION dollars again. This traditional definition of deficit is quite simple: it is the difference between what the government collected in taxes and fees and what it spent in a single fiscal year. The difference is the annual deficit which is financed by selling Treasury bonds, future IOUs, to cover the difference between what is collected as wealth and what is spent.

Just looking at these annual results is not a good news story. If we assume that the average annual deficit of the Federal government over the past few years is about $1.2 TRILLION a year, then on average, if the Treasury did not sell bonds and IOUs, every American household would be on the hook for an additional $10,500 per household to cover the deficit shortfall EVERY YEAR of the Obama administration. Since the average income for an American household is about $50,000 a year, this means that we would all have to pay a whopping additional 20% of our gross annual household income just to cover the Federal government's annual deficit.

Of course, every American household really is on the hook for the deficit shortfall, they just do not pay that additional number NOW since the Treasury Department continues to mortgage our future by Treasury selling bonds. Those bonds will eventually have to be paid off by every American taxpayer.

A horrific financial situation. Outlandish and wasteful spending by the Washington political class, which wastes hundreds of billions of dollars every year in order to attain these TRILLION dollar plus deficits.

But these numbers and spending deficits are just for current government operating expenses and costs. The USA Today article presents a more realistic, and more horrific view, of the country's dire financials:

• The official government deficit for the 2011 was $1.3 TRILLION.
• However, according to the USA Today analysis, the more accurate estimate is an astronomical $5 trillion.
• The reason for this large discrepancy is that Congress exempts itself from reporting the cost of promised retirement benefits incurred in any one year when computing the annual deficit.
• This exemption, of course, does not apply to private sector companies which must include these future liabilities and commitments in their business financial statements in order to give a truer picture of their actual financial situation and to not break the law.
• The USA Today analysis found that the liabilities for Social Security, Medicare and other government retirement programs rose by $3.7 trillion in 2011, but the amount was not included on the government’s financial ledgers and reports even though they are committed future expenses.
• If these retirement and liabilities and commitments were included in the outlook for 2011, the actual, more definitive, deficit total would be equal to about $43,000 for every American household, about four times higher the horrific estimate we went through above.
• Since the median income of U.S. households is $49,445, according to the latest Census findings, the average American household would have shell nearly all of its annual income in taxes to balance the real government liabilities incurred in 2011 if standard accounting rules were used to compute the Federal government deficit.
• If these better and more accurate accounting rules were taken into account by the Federal government, and the Washington political class, the annual spending deficits from 2004 to 2011 would be six times larger the official total of $5.6 TRILLION.
• The USA Today  report also determined that all future Federal debt and retiree commitments equal $561,254 per household.
• Since the average American household also owes $116,057 for its own mortgages, car loans and other debts, the total debt burden as of today for every household is about $676,311.
• Thus, on average, every American household would have to work 14 straight years, without paying any other taxes, paying any medical bills, eating, taking vacations, fixing up their homes, going to the movies, or incur any other expense in order to dig the nation out of the debt pit the political class has thrown us into.

Mind boggling. Obviously, something is going to have to give, the above trajectory of disaster will eventually manifest itself somehow. The Federal government may choose to continually raise taxes to pay off the debt which eventually will collapse the economy from lack of disposable spending. Or those Social Security, Medicare, and Medicaid promises will have to be broken since their exponential rise in cost, without the concurrent collection of wealth to pay for these future liabilities, cannot not be met.

The USA Today article and analysis have provided a great service to the country, a service that most Americans are not aware of and most politicians, given their short term, myopic thinking, do not want you to be aware of. We are in far worst financial condition than most of us are aware of. To stave off the collapse of our financial affairs and save our democracy, the following steps from "Love my Country, Loath My Government" need to be taken immediately:

1. Step 1 - a coherent plan of reducing government spending 10% a year for five years must be undertaken to get Federal government spending under control. Unnecessary and redundant programs and organizations need to be terminated. The wasting of hundreds of billions of dollars every year due to inefficiencies and criminal fraud need to be stopped. Obama's deficit reduction commission, which he completely torpedoed and ignored, would be a good first step to putting this Step 1 into operation.
2. Steps 10, 11, and 12 - These steps would reform Social Security by reducing the Social Security tax rate but applying it to all forms of income without any cap, raising the retirement age to 70 years old with a hardship exemption, and excluding anyone worth more than $3 million from ever receiving a Social Security check.
3. Step 28 provides a process to finally attack the root causes of our escalating health care costs and put a plan into effect to attack those root causes, something that Obama Care will never do.
4. Step 39  would implement term limits so that we can finally remove those sitting politicians that have been around forever but who have gotten us into this financial debt pit. Since they were not part of the solution, they must be part of the problem and need to be removed forever from office.

I do not know if even these five steps are enough to get us out of our debt pit. I do know that the longer we wait for someone, anyone, in Washington to show a little guts, courage, leadership, and vision in this area, the tougher it will be to climb out of this debt pit. We can only hope that the hole does not collapse upon on us before we get out, taking our economy and our liberty with it.


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http://www.unitedstatesofpurple.com/

The United States of Purple is a new grass roots approach to filling the office of President of The United States by focusing on the restoration of freedom in the United States, focusing on problem solving skills and results vs. personal political enrichment, and imposing term limits on all future Federal politicians. No more red states, no more blue states, just one United States Of America under the banner of Purple.

The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times.

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http://www.reason.com/
http://www.repealamendment/