Government

The National Debt: Far Worse Than You Realize

At $88.9 trillion, the DC Swamp, it turns out, is far deeper and wider than anyone thought possible.

Jordan Candler · Mar. 12, 2018

You’ve heard the adage — if the government functioned like a home or corporation does, its balance sheet would be so convoluted and full of red ink that it would utterly fail. A person’s ability to keep a home or business afloat is entirely contingent on their financial literacy and managing proficiency.

The federal government, however, is not bound by the same rules. Not only does it operate with deep and worsening deficits, but its true financial condition is disguised by shady and elusive accounting metrics. The headline national debt is nearing $21 trillion, but the truth is that this figure is significantly deflated. Citing new Treasury research, PJ Media reports:

If the national debt were officially calculated the way assets for private companies are calculated — by tallying assets, debts, liabilities, and obligations — the official federal debt would be $88.9 trillion, or $704,000 per household.

This represents no less than four times the projected national debt of roughly $20 trillion. The federal government uses accounting practices different from private companies, and so it can report a much smaller national debt than its true liabilities account for.

While the federal government reported a budget deficit of $666 billion for the 2017 fiscal year, a new comprehensive report from the U.S. Treasury showed that finances really deteriorated by $1,157 billion. The document explained that this difference comes from accrued costs that are not necessarily paid, such as estimated future costs of federal employee and veterans’ benefits.

This discrepancy is tied to what’s known as accrual accounting, a method utilized by the Treasury in its report. “Accrual accounting involves measuring the full spectrum of financial commitments,” according to PJ Media, “while cash accounting — the kind used to calculate the federal budget — only counts money as it flows in and out.”

The author points to worker’s pension benefits as an example. If the Treasury standard were applied, “an employee’s pension would be recorded as the employee earned it. Under cash accounting, this liability would not emerge as a cost until years or decades later, when it is actually paid.”

If we take off the rose-colored glasses, the reality is that taxpayers are $7.7 trillion in the hole when it comes to funding public-worker pensions and benefits. And that’s just one example. Social Security and Medicare together are $65 trillion in the hole. The DC Swamp, it turns out, is far deeper and wider than most people realize. And the catastrophe will be gradual until it’s sudden.

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