Welcome to the start of the New Year.
Lets start off on the right foot, with something incendiary and infuriating: The terrific John Crudele of the NY Post cuts thru the government obsfucations on the deficit: Beltway Bandits’ Storm: $615b Deficit Snow Job
December 28, 2004 — WHAT would you think if I told you that 2004’s federal budget deficit was really $615 billion, which is about 30 percent bigger than you’ve read in the newspapers? Now, what would you think if the Secretary of the U.S. Treasury told you this?
After you look at the government numbers I will present at the end of this column you’ll see that President Bush is absolutely correct in saying that the Social Security system’s finances need to be reformed immediately — although I disagree that privatization is the solution.
Two weeks ago, the U.S. Treasury posted on its Web site a financial statement for the country that was compiled in the same way companies are required to keep their books.
You can find it at here http://www.fms.treas.gov/fr/04frusg/04frusg.pdf
The Web address alone should provide some hint as to how inaccessible this information is.
And, as best I can see, the Treasury didn’t issue any big press release publicizing this information.
But don’t think the government is suddenly becoming forthcoming with
information. This fiscal report, using Generally Accepted Accounting
Principles (or GAAP), is now required by law.
The news was slipped out just before the holiday season and the release date was at least three months ahead of schedule.
In the journalism business these are all signs that someone doesn’t
want the public to know something. So, just what could that something
I’ll let John Snow tell you in his own words, contained in report’s
prelude that is titled "A Message from the Secretary of the Treasury."
"In the fiscal year 2004, government revenues were $1.9 trillion . . .
The net cost of the government’s operations was $2.5 trillion . . .
Total revenues less operating costs resulted in a net operating cost of
slightly more than $615 billion," Snow states.
I took some words out to make it understandable. Now, allow me to translate: the government ran a deficit of $615 billion.
In the missing parts, the Treasury Secretary correctly said that this
was an improvement from the $668 billion deficit that the government
ran in 2003. He correctly added that this was the first gain in revenue
in four years.
Notice that Snow took great pains to avoid using the term "deficit."
But even a kid with a paper route understands that when the "net
operating cost" — as the Treasury Secretary calls it — exceeds
revenues, that’s the definition of a deficit.
You can be forgiven if you thought that Washington’s budget deficit was
"just" $412 billion in the last fiscal year because that’s the number
the government puts out in the big press release. And that’s the figure
that the media plays up.
How can there be a $203 billion discrepancy in the numbers?
It mostly has to do with Social Security costs and cash vs. accrual
accounting. The $203 billion gap (between the $615 billion "net
operating cost" and Washington’s officially publicized $412 billion
budget deficit) is the amount of Social Security money that the
government collected and used for its everyday operations.
If you are looking at Snow’s statement, turn to the table on page 11, entitled "Overall Perspective."
Look at the last line called Total Assets minus Total Liabilities &
Net Responsibilities. The liabilities grew to $45.9 trillion at the end
of 2004, compared with liabilities of $34.8 trillion at the end of the
In other words, what the accountants call the net present cost of
unfunded future obligations grew by a massive $11.1 trillion in just
the past year. That’s why Social Security as well as Medicare needs to
be fixed — NOW.
Pathetic . . .
Beltway Bandits’ Storm: $615b Deficit Snow Job
New York Post, Dec 28, 2004
Download PDF of report (04frusg.pdf)