Treasury Data Reveals Federal Shortfall of $614,000 per U.S. Household
Newly published data from the U.S. Treasury shows that the federal government has amassed $76.4 trillion in debts, liabilities, and unfunded Social Security and Medicare obligations. This amounts to $614,000 for every household in the U.S., a burden that equals 90% of the nation’s private wealth, including the combined value of every American’s assets in real estate, corporate stocks, small businesses, bonds, savings accounts, cash, and personal goods like automobiles and furniture.
Federal law requires the U.S. Treasury and White House to produce an annual report on the “overall financial position” of the federal government. The law also requires the Government Accountability Office to audit the data, which is then published in the Financial Report of the United States Government.
Unlike the federal budget, which primarily uses “cash accounting,” this report uses “accrual accounting.” The Government Accountability Office explains that this accounting method “is intended to provide a complete picture of the federal government’s financial operations and financial position.”
Cash accounting is the simple process of counting money as it flows in or out. In contrast, accrual accounting measures financial commitments when they are made. For example, as federal workers earn pension benefits, accrual accounting measures these obligations in the year that they are earned. Cash accounting does not measure such liabilities until they are paid, which may not be until years or decades later.
The federal government requires large corporations to use accrual accounting for their pension plans, because this is the “most relevant and reliable” way to measure their financial health. The same applies to other retirement benefits like healthcare. The official statement of this rule explains that “a failure to accrue” implies “that no obligation exists prior to the payment of benefits.” Since an obligation does exist, failing to account for it “impairs the usefulness and integrity” of financial statements.
Nonetheless, the federal budget, which is the “government’s primary financial planning and control tool,” is not bound by the accounting rules that the government imposes on the private sector. In the words of the U.S. Treasury, the federal budget is prepared “primarily on a ‘cash basis’.”
This has major implications for future taxpayers, partly because pension and other retirement benefits are a large part of compensation packages for federal employees. When these benefits are included, civilian, non-postal federal employees receive an average of 16% more in compensation than private-sector workers with comparable education and work experience. Postal workers receive an even greater premium.
The recently released Treasury report shows that the federal government currently owes $6.7 trillion in pensions and other benefits to federal employees and veterans. Paying the present value of these benefits would require an average of $54,000 from every household in the U.S. Yet these liabilities are not reflected in the current federal budget or publicly held national debt.
Cont... |
