The real federal deficit is much worse than what’s being reported, according to a new report from USA TODAY.
“The typical American household would have paid nearly all of its income in taxes last year to balance the budget if the government used standard accounting rules to compute the deficit,” Dennis Cauchon writes for USA TODAY.
That is, if the federal government operated under GAAP (Generally Accepted Accounting Principles) and the accounting rules legally required of major businesses, government debt is about $42,054 per household, which is almost four times the “official” number being reported by Washington.
Considering that the median income for the average U.S. household is about $49,000, we’d say that the “real” deficit numbers are pretty scary.
But why are the numbers different? Why does Congress report one thing while basic accounting rules report another?
“The big difference between the official deficit and standard accounting: Congress exempts itself from including the cost of promised retirement benefits,” Cauchon explains.
“Yet companies, states and local governments must include retirement commitments in financial statements, as required by federal law and private boards that set accounting rules,” he adds.
Under the accounting rules required of businesses, the national deficit in 2011 was $5 trillion. But under Congress’ “official” accounting rules, the national deficit was $1.3 trillion.
“Liabilities for Social Security, Medicare and other retirement programs rose by $3.7 trillion in 2011,” Cauchon adds, “but the amount was not registered on the government’s books.”
The USA TODAY report says the “fluctuations in the deficit” have not been dependent on whichever party controls the nation’s capital.
Here are some of the other things the USA TODAY report found [block quotes from the report]:
- Social Security had the biggest financial slide. The government would need $22.2 trillion today, set aside and earning interest, to cover benefits promised to current workers and retirees beyond what taxes will cover. That’s $9.5 trillion more than was needed in 2004.
- Deficits from 2004 to 2011 would be six times the official total of $5.6 trillion reported.
- Federal debt and retiree commitments equal $561,254 per household. By contrast, an average household owes a combined $116,057 for mortgages, car loans and other debts.
“By law, the federal government can’t tell the truth,” Sheila Weinberg, an accountant for the Institute for Truth in Accounting, told USA TODAY.