Posted on 12/14/2006 1:58:53 PM PST by bordergal
A report scheduled to be released by the Treasury Department tomorrow is expected to show the true deficit in the Bush administration's 2006 federal budget to be an astounding $3.5 trillion in the red, not $248.2 billion as previously reported. "The Bush administration is running a federal budget deficit at an unsustainable, system-dooming pace of about $3.5 trillion a year, econometrician John Williams, who publishes the website Shadow Government Statistics, told WND.
Williams' argument is fully validated in the Financial Report of the United States, a little-known report Congress has mandated that the Treasury Department publishes each year, reporting the federal budget on a GAAP accounting basis, not on a cash accrual basis.
The 2006 edition of the Financial Report of the United States is due out tomorrow.
"Typically, the Treasury reports the budget deficit on current accounts basis. That's why Treasury announced recently that the 2006 federal budget deficit was going to be $248.2 billion. But it is a gimmick," Williams claimed.
"When we see the Treasury report on Friday we are probably going to find out that the real 2006 federal budget deficit is more like $3.5 trillion."
Williams predicts, however, the mainstream media won't report it.
"It's not the type of news Reuters, Bloomberg and the Wall Street Journal like to broadcast to investors and the American public," he said. "Besides, the financial press won't take the time and effort to analyze the figures and comb through the footnotes. The report is going to be released on Friday and most financial reporters aren't accountants."
Why the huge discrepancy between the two figures?
"The $248 billion federal budget deficit figure results from what basically amounts to a cash flow analysis," Williams explained. "On a cash basis, the Treasury takes all the tax revenue, including Social Security taxes, as current income. The trick is that Treasury essentially steals the money that comes in on Social Security taxes, without accounting for any offsetting Social Security liability. When you run your accounting that way, the Treasury gets to report a federal budget deficit that dramatically reduces the real figure."
What's different about the anticipated 2006 Financial Report of the United States?
"Congress a few years ago mandated that the Treasury had to report one report each year that used GAAP accounting," Williams told WND. "Then, when you figure in all liabilities including Social Security and Medicare, the real 2006 deficit is huge by comparison. What I expect to show up on Friday is a real federal budget deficit of $3.5 trillion or more, not the $248.2 billion earlier reported."
"Even worse," Williams continued, "the U.S. Government's negative net worth widened to $49.4 trillion in 2005. For the first time, total government liabilities have topped $50 trillion, and the number is continuing to grow. The United States is bankrupt, whether the Bush administration wants to admit it or not."
A quick study of the table Williams has posted on his website shows the alarming nature of the Bush administration federal budget shortfalls when GAAP accounting methods are used and all Social Security and Medicare liabilities are fully realized. How serious a problem are federal deficits of this magnitude?
"A federal budget deficit in the trillions of dollars is beyond the reach of fiscal control," Williams answered. "Even if the federal government raised individual and corporate income taxes to 100 percent, simply confiscating every penny every business and person in the U.S. made, we would still have a federal deficit."
"There are lots of people who know that the federal deficit is in the trillions," Williams continued. "The problem is that few dare sound the alarm. The magnitude of the budget deficit problem is just too enormous and neither political party has the courage to address the problem."
Williams is clear about the coming danger.
"The United States is bankrupt," he insisted. "With less than one-tenth of the actual deficit being reported each year, a cumulative negative net worth exceeding $50 trillion has built up in stealth to where the total obligations of the U.S. government are now more than four times our annual gross domestic product.
"The Treasury numbers in the Financial Report of the United States are hard," Williams insisted, "and the doomsday is not far off. Still, the Treasury is going to report the numbers on a Friday and I don't expect you will hear much about it."
Williams' website issues a dire warning to WND:
"Indeed the unfolding fiscal nightmare likely will entail a U.S. hyperinflation and a resulting collapse in the value of the world's primary reserve currency, the dollar. When this starts to unravel it will unravel fast. I don't know whether it will be the dominant issue in the 2008 presidential election, but I believe it will be by 2012." The Treasury Department confirmed to WND the 2006 Financial Report of the United States will be issued tomorrow at 11:00 a.m. Eastern time at a Treasury Department press conference. The Treasury Department declined to comment on the content of the report.
When the report is released, Treasury Secretary Henry Paulsen and Federal Reserve chairman Ben Bernanke will still be in China. Just before Thanksgiving, China started a dollar sell-off by suggesting Beijing wanted to hold less than the current 70 percent of its $1 trillion in foreign exchange reserves in U.S. dollars. Paulsen and Bernanke plan to explore with China ways the U.S. can reduce the large and growing U.S. trade deficit.
I think he is talking about the unlocked lockbox. Been this way forever.
"Congress a few years ago mandated that the Treasury had to report one report each year that used GAAP accounting..."
The do-nothing, profligate, corrupt, globalist, divisive, and mean GOP Congress mandated something that would coax the government toward fiscal sanity? Hmmmmm.
I believe total federal outlays were 2.6 trillion.
So if the govt. spent zero and still had the taxes the same, one is saying that we would still have a 1 trillion dollar deficit.
This report says federal outlays on a gaap basis is 5.1 trillion.
I have not read the report, but it seems to be irrelevant.
World Nut Doily. What did you expect?
Of course passing a law immediately raising the retirement age by 10 years would instantly produce about a 20 trillion dollars "surplus" for that year.
sometimes cash flow accounting is superior than accrual accounting.
Not that I'm versed in the issues of the economy... John Williams has been issuing doom&gloom predictions for about 25 years. However, his first (out of 2) stopped clock moment is still to come.
A lot closer to truth.
Not alarmism.
It's using the accounting method businesses have to use, taking into account the total obligations taken on by the government during this year, but not factoring the possible future revenue.
We are still collecting more social security cash than we are paying out, but we are "borrowing" that. That's a REAL deficit we are ignoring I guess, and I think if we counted that as borrowing the deficit would be around 600 billion instead of 200 billion.
But this report takes into account that we have an obligation to pay medicare and social security and also some pension liabilities and other liabilities, and if you add them all up our total liabilities went up by this trillions of dollars they mention.
But I think the statements ignore the revenue that is expected in future years. In other words, this is how bad it would be if, on December 31st, the United States closed it's doors, didn't collect another dime in taxes, but still paid off all of it's current obligations -- in other words, just like what a business has to keep track of.
Business has a real problem with these rules regarding pensions, which is why they switch to defined contribution plans which don't incur future liabilities. But businesses with defined benefit plans at least have invested money to cover those plans, rather than counting on future business income to pay them.
The United States has pension obligations for 1/10th of the work force of the country (that might be an exaggeration, how much of the total work force is employed by the federal government?), but has not save a single dime to cover that obligation. When those people retire, they are paid from existing taxes, while we also have to hire new people to replace them.
I don't know whether we should all run around screaming or not, because there's just no way I can get my hands around 50 trillion dollars of "debt", or understand whether that is unmanageable based on projected future tax revenue.
Just about anything in World Nut Daily is bogus.
Any discussion of the federal deficit will never come close to understanding it because the ASSETS of the United States government are not mentioned. How much are whole states worth? How much are the buildings worth? What is the US military worth?
Almost all discussions are extremely superficial and of use only to provide political rhetoric.
You can't be serious.
Corsi is writing crap these days. He did some good with the Swift Boaters with John O'Neill in helping to write Unfit For Command, a best seller. Success will not repeat for him with
what he is writing lately.
Dead serious. Generally accepted accounting principles (GAAP) require accounting for known liabilities. But, for obvious reasons, Congress doesn't require the federal government to follow GAAP.
You're referring to the balance sheet.
The $3.5T deficit is on the income statement.
They also require accounting for assets which is not done now.
Businesses don't count future liabilities against current income.
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