Re: Rules 'hiding' trillions in debt

Jim Higgins wrote:
Rules 'hiding' trillions in debt
http://tinyurl.com/ysjpbe

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 ***, 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.

http://tinyurl.com/36ohpn

Horror Flick at USA Today:Return of the Granny Bashers XCV

Yep, the good folks at USA Today are it again. They have yet another really scary article on the trillions of dollars of debt that the United States government has incurred.

The article not only fails to put the trillions in any context that would make it meaningful to readers (e.g. express it as a share of future income @ 7 percent), it goes out of its way to use a context that further misleads readers. It tells readers that the debt comes to $516,348 per household. That number would sound somewhat less scary if the article pointed out that by the same methodology, future income comes to more than $6 million per household.

Of course, if the purpose of the article were to convery information, it would point out that the vast majority of this projected burden is attributable to the projected explosion in private sector health care costs. (This fact is noted in a quote from an analyst at the "liberal" Center on Budget and Policy Priorities.) The projections show that if health care costs continue on their projected trend, then it will bankrupt the economy. It will also be really bad for the budget.

There is a powerful lobby (e.g. pharmaceutical companies, insurance companies, and doctors) that don't want to see the health care system reformed. The constituency for retire benefit programs is much less well organized. Therefore USA Today gives us stories like this beating up on retiree benefit programs and largely ignores the incredible inefficiency of the U.S. health care system.

--Dean Baker (from his blog, 2 Beat the Press)
.

Loading