USA Today had a spot-on analysis of how misleading federal accounting practices are. In a previous article elucidating how Social Security is not Pay-As-You-Go, I pointed out the fallacy of this “system”, as it is a method of hiding future realities. USA Today takes this concept further and examines the entirety of the government’s deficit reporting:
The big difference between the official deficit and standard accounting: Congress exempts itself from including the cost of promised retirement benefits. 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.
Exactly. Any business profession which failed to take into account future liabilities would face scrutiny from the SEC.
The main argument for exempting future retirement promises into the deficit calculation is that the government has the flexibility to change the amount it is obligated to pay out by tweaking the formula — such as raising taxes or cutting benefits — while businesses do not typically have that luxury. Such a ridiculous premise. The deficit amounts are always in flux and this excuse only serves to hide the reality of extra trillion dollar obligations that no one wants to fix, own up to, or reduce. A few days ago, I did some number crunching on the “official” federal deficit figures. I can’t fathom the results I’d get incorporating the data USA Today compiled.
From the USA Today findings:
•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.
With folks like Dick Durbin perpetuating the lie, it’s no wonder how ignorant much of the population is with regard to proper accounting practices and fiduciary responsibility.