Front Page USA Today

Discussion in 'Financial Cents' started by Clyde, May 29, 2007.

  1. Clyde

    Clyde Jet Set Tourer Administrator Founding Member

    Rules 'hiding' trillions in debt
    Liability $516,348 per U.S. household
    By Dennis Cauchon
    The federal government recorded a $1.3 trillion loss last year — far more than the official $248 billion deficit — when corporate-style accounting standards are used, a USA TODAY analysis shows.
    The loss reflects a continued deterioration in the finances of Social Security and government retirement programs for civil servants and military personnel. The loss — equal to $11,434 per household — is more than Americans paid in income taxes in 2006.
    "We're on an unsustainable path and doing a great disservice to future generations," says Chris Chocola, a former Republican member of Congress from Indiana and corporate chief executive who is pushing for more accurate federal accounting.
    Modern accounting requires that corporations, state governments and local governments count expenses immediately when a transaction occurs, even if the payment will be made later.
    The federal government does not follow the rule, so promises for Social Security and Medicare don't show up when the government reports its financial condition.
    Bottom line: Taxpayers are now on the hook for a record $59.1 trillion in liabilities, a 2.3% increase from 2006. That amount is equal to $516,348 for every U.S. household. By comparison, U.S. households owe an average of $112,043 for mortgages, car loans, credit cards and all other debt combined.
    Unfunded promises made for Medicare, Social Security and federal retirement programs account for 85% of taxpayer liabilities. State and local government retirement plans account for much of the rest.
    This hidden debt is the amount taxpayers would have to pay immediately to cover government's financial obligations. Like a mortgage, it will cost more to repay the debt over time. Every U.S. household would have to pay about $31,000 a year to do so in 75 years.
    The Financial Accounting Standards Advisory Board, which sets federal accounting standards, is considering requiring the government to adopt accounting rules similar to those for corporations. The change would move Social Security and Medicare onto the government's income statement and balance sheet, instead of keeping them separate.
    The White House and the Congressional Budget Office oppose the change, arguing that the programs are not true liabilities because government can cancel or cut them.
    Chad Stone, chief economist at the liberal Center on Budget and Policy Priorities, says it can be misleading to focus on the government's unfunded liabilities because Medicare's financial problems overwhelm the analysis.
    "There is a shortfall in Medicare and Medicaid that is potentially explosive, but that is related to overall trends in health care spending," he says.

  2. ghrit

    ghrit Bad company Administrator Founding Member

    So why is the illustrious citizenry sit still for this? Might have something to do with the mainstream media, else how does a sheep know when he/she is getting shorn? You reckon not until the wool is on the floor, then what to do about it?
    Seems to me that investigative reporting is more interested in why Lindsey Lohan got hauled off to the hoosegow (again) than where their money is going. One might suppose that Ms. Lohan is being paid by the dot gov to put on a show for the citizens. Bread and circuses, wasn't it? :mad:
  3. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    were all going to hell
  4. Clyde

    Clyde Jet Set Tourer Administrator Founding Member

    Shearing in process as the mainstream media begins to sell the future so we all have to rely on the .gov to save us from the .gov.

  5. BRONZ

    BRONZ Monkey+++ Moderator Emeritus Founding Member

    reminds me of the beginning of the book Patriots.
  6. ghostrider

    ghostrider Resident Poltergeist Founding Member

    #1, USA Today is hardly a financial powerhouse, read daily by savvy investors.
    #2, the writer has distorted the basic premise of accruals, if that is the accounting practice he refers to. An accrual is used to record a liability for which no bill has yet been received, so the expense can be recorded for the period it was incurred. A company has to record an electric bill incurred in December but has not yet received a bill, so it uses an accrual so it can close its books for the year. The company has to record December, not future promises to pay bills.
    NO company, no accounting rules make a company record future promises, or electric bills due in 2017.

    I agree, Clyde there must be something there, but reporting needs to be facts, not distortions. This dude needs to go research the menu additions at McDonald's and report on them.
  7. Clyde

    Clyde Jet Set Tourer Administrator Founding Member

    Actually they did rewrite the rules for themself. Unfunded future expenses are already "billed" because we know they have to be paid based upon the next 30 years of Baby Boom retirement. The bill for said expenditures was submitted when each one of the employees signs their w-4 and starts paying into the system; therefore, they have played with the accounting rules by not taking into account these future obligations.

    Tough New Accounting Rules Proposed

    Today the Financial Times reports on a proposal to require the federal government to account for future entitlement spending. FT reports,
    The proposal by the federal accounting standards advisory board (FASAB) – which would also require the government to account for benefits accrued under Medicare and other social insurance programmes in the same way – is unprecedented internationally. It would radically change the presentation of US government finances, in effect bringing forward the cost of rapidly increasing social security and Medicare obligations and greatly increasing the reported fiscal deficit.​
    Last year Alison Fraser argued why accrual accounting is fiscally responsible. She wrote,
    Amending the federal budget process to include this principle of planning for future obligations would:
    • Impose responsible fiscal management on the budget process. Significant policy undertakings such as the Medicare drug benefit should contain a sound financial plan and make an annual allocation toward any liability or obligation.
    • Require recognition of future liabilities and obligations in annual budget plan*ning. The budget is now written on a cash basis and does not plan for the huge liabil*ities and obligations that will come due in the future. This would provide Congress with a long-term budgetary context for proposals to fix entitlement programs within which new costs would be evalu*ated against future savings.
    • Force lawmakers to recognize the true cost of proposed future entitlements in the annual federal budget. This would require Congress to begin to rein in the federal govern*ment’s commitments that will come due in the future and would discourage lawmakers from voting for new benefits and passing on the cost to future Congresses.
    If companies could operate the same way, they would be banktrupt like our government
  8. ghostrider

    ghostrider Resident Poltergeist Founding Member

    I would go three steps beyond those.
    • Social Security would have to be managed like an annuity, the principle would have to be in the account, untouched, to cover future expenses at current interest rates, not just an annual allocation.
    • Congress would not be able to borrow from these accounts.
    • If they spend more than the balanced budget, it comes out of their pay.
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