The truth about the U.S. budget deficit: It’s 13x worse than you think

December 22, 2010

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.”

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So Pethokoukis got one right: the stopped clock is right twice a day. And he didn’t even talk about state and local gov’t with huge, unfunded pension obligations. At least I’m glad this trogladyte cheers HC reform. Atypical, since he’s so typically doctrinaire crackpot.

Posted by Inugomontoya | Report as abusive

[...] This post was mentioned on Twitter by Mike Cane. Mike Cane said: The truth about the U.S. budget deficit: It’s 13x worse than you think http://t.co/9LMKg9t #doom #WASF @fuTuRe_sHOcK @gold_tracker [...]

All parties, from providers to insurers to drug companies to individuals, have a role to play in helping to control health care costs. Check out Whatstherealcost.org for what you can do and what the health care system should be doing.

Posted by ChristineRegenc | Report as abusive

[...] of 2.6 percent. Austerity is the most searched word at Merriam-Webster. The budget deficit may be 13 times worse than we [...]

[...] Austerity is the most searched word at Merriam-Webster. The budget deficit may be 13 times worse than we [...]

[...] of 2.6 percent. Austerity is the most searched word at Merriam-Webster. The budget deficit may be 13 times worse than we [...]

Sitting presidents should be required to address the Financial Report of the United States each year in their State of the Union address.

A little more gritty reality and a little less fluff would be useful.

Posted by breezinthru | Report as abusive