My favorite East Village bar burned down last Wednesday evening.
The Raven was a great place to go and drink off the results of postings like the one I just stumbled upon over at the
Democratic Underground (frankly, given the progressive politics of owners Harold and Ria, I would NOT be suprised if Karl Rove was somehow involved)...
A little-noticed Treasury Department report sent to congressional leaders in December paints a bleaker picture of the nation's finances than is widely accepted and is beginning to attract attention as lawmakers prepare for election-year budget battles.
Much more after the break if you dare.
Bleak deficit picture in Treasury report concerns lawmakers
By Peter Cohn, CongressDaily
A little-noticed Treasury Department report sent to congressional leaders in December paints a bleaker picture of the nation's finances than is widely accepted and is beginning to attract attention as lawmakers prepare for election-year budget battles.
According to the 158-page report, the fiscal 2005 federal deficit on an accrual basis was $760 billion, using generally accepted accounting principles that private businesses must use to present their finances.
That is an increase of $144 billion, or 23 percent, over the previous year's deficit of $616 billion. The cost to operate the federal government, including accrued benefits, was $2.95 trillion, versus $2.19 trillion in total revenues, resulting in the $760 billion net operating cost.
These figures are in stark contrast to the $319 billion deficit reported by Treasury for fiscal 2005, which uses the government's accepted barometer of cash outlays versus revenues. That number represents a $93 billion decrease from the previous year's deficit of $412 billion, which Republicans trumpeted as a vindication of their fiscal policies.
The sharp difference between the reported deficit and actual net operating cost is largely a result of counting accrued benefits owed to veterans and federal employees, just as companies must report their pension obligations.
"Businesses are required by law to use accrual accounting. If you want Congress to be run like a business, you need accrual accounting," said Rep. Jim Cooper, D-Tenn., a member of the Blue Dog Coalition of moderate-to-conservative Democrats.
Cooper said he was irked that the Treasury report was not widely disseminated. "We got more notification on the NSA domestic surveillance thing," he said.
A Treasury Department spokeswoman said the report was posted on the agency's Web site upon its Dec. 15 release. It circulated widely in financial circles, but did not attract much attention in Washington at the time.
"Given these and other factors, a fundamental re-examination of major spending programs, tax policies and government priorities will be important and necessary to put us on a prudent and sustainable fiscal path," Walker said. "This will likely require a national discussion about what Americans want from their government and how much they are willing to pay for those things."
The Treasury report's figures on how much the government owes are particularly striking. In fiscal 2005, government liabilities increased by $808 billion, or 8.9 percent, to $9.9 trillion -- and that is just what shows up on the balance sheet.
Off the books, the total value of all federal responsibilities -- including future payments on social insurance programs like Social Security, Medicare and federal employee benefits -- totals $49.4 trillion over 75 years.
Bill Hoagland, budget adviser for Senate Majority Leader Bill Frist, R-Tenn., considers Treasury's annual financial report a must-read. "It provides one of the best estimates on the unfunded liabilities anywhere in the government. I wish others would read the report more regularly when it comes out," he said.
Now check out this comment posted at DU by journalist Scott Burns who wrote about this issue last May. Here are some excepts but his full article is worth the read...
The government's $43 trillion secret
Long before the latest tax cut, the government got word that its long-term obligations are 10 times the amount previously thought -- and promptly buried the study.
By Scott Burns
On Friday, May 16, the word was out. A $350 billion tax cut was a done deal.
So why did the stock market sink that day? Why did it plunge the following Monday, losing 2.5% of its value?
One possible explanation is Treasury Secretary John Snow and his comments on the dollar. Another is concern about new terrorist attacks. But let me suggest a third possibility: In spite of efforts to suppress it, word is getting around we can't afford a tax cut. *
The story starts one night in January, only days after Treasury Secretary Snow had replaced Paul O'Neill.
Two men were leaving a restaurant in Santa Fe, N.M. A cell phone rang. The caller told Boston University economist Laurence J. Kotlikoff that six months of work by two economists was going to be deleted from the president's budget. The budget was due to be published in February. I know this happened, because I was the second man: Professor Kotlikoff was in Santa Fe working on a book project with me.
*The material to be deleted from the budget document was an updating of generational accounting. Former Treasury Secretary O'Neill had requested an estimate of the true, long-term obligations of the U.S. government.
The estimate would include the formal debt of the U.S. Treasury plus equally serious government promises to provide retirement income and medical care. (Readers who think promises of Social Security and Medicare aren't as serious as U.S. Treasury bond promises should visit the nearest elderly person.)
The resulting information might easily have been lost in a document whose online girth is measured in megabytes.
Except for one thing.
The new accounting shows the United States is broke.
The study shows the true obligations of government were 10 times larger than Treasury debt held by the public. It shows the present value of these unfunded obligations is a mind-numbing $43 trillion.
In a recent telephone conversation I asked one of the project economists, Jagadeesh Gokhale, why he thought his work was cut. Dr. Gokhale, a senior economist for the Federal Reserve Bank of Cleveland, was circumspect. He suggested the figures were a surprise to the new Treasury secretary.
Here's another interpretation: Treasury Secretary Snow's first task was to sell the president's tax cut. The sales job would be awkward if an official government document announced we were already $43 trillion in the hole. (The Federal Reserve, by the way, recently put the net worth of all households at $39 trillion. This problem goes way beyond taxing the rich, the poor or the middle class.)
So the generational accounting figures disappeared from the budget.
"When the liabilities associated with those programs are taken into account, the nation's fiscal policy is currently off-balance by over $43.4 trillion in present value, a number that is not reported in standard budget documents," he told the committee (italics added).
The American Enterprise Institute will soon publish a pamphlet, co-authored by Jagadeesh Gokhale and Kent Smetters. The draft copy, which I've read, does more than lay out the size of the unfunded liabilities of government. It shows how much the current generation is benefiting at the expense of the next.
*It shows, for instance, that past and current generations of Social Security recipients will receive $8.7 trillion more in benefits than they will pay in employment taxes. Our children and grandchildren will pay $1.7 trillion more in employment taxes than they will receive in benefits.
I asked Dr. Gokhale if the figures in the AEI document, Smetters' testimony, and what was supposed to appear in the president's budget were identical. He said there had been some changes in assumptions. But they were very similar.
Republicans and Democrats have distracted us with unending battles between haves and have-nots for decades. Over the same period they have bankrupted the country.
Perhaps that terror, not the terrorism of al-Qaida or currency traders, may explain the odd market decline after a tax cut that was supposed to make stocks soar.
Anyone know where I can buy tar and feathers in bulk at a discount?