The Bush Legacy: $32 trillion worse off

The US Treasury Department released today its Financial Report on the United States. In short, the financial position is grim.

While the Administration will emphasize that the annual federal deficit shrunk to $163 billion for the fiscal year ended September 30, 2007, that’s not the real story.  The real story is that the fiscal exposure of the US government is $53 trillion, a number which has increased under Bush more that $32 trillion from about $20 trillion as of September 30, 2000.

You don't immediately see the true picture because politicians and the press do not emphasize the correct numbers.  If the federal government prepared its books using the same principles as private corporations, it would include the cost of future benefits payments.

For the US government, the principal differences between the $9 trillion of funded debt that you have probably heard of, and the $53 trillion of total exposure, is the net present value of promises to pay Medicare and Social Security benefits in excess of revenues these programs will raise.  Medicare represents about $34 billion of the fiscal gap, including $8 trillion for Bush's prescription drug benefit, Medicare Part D.

David Walker is the Comptroller General of the United States, and head of the Government Accountability Office, an investigative arm of Congress. Mr. Walker was appointed to his job by Bill Clinton in 1998.  Mr Walker, commenting today in a speech today at the National Press Club said:

"If the federal government was a private corporation and the same report came out this morning, our stock would be dropping and there would be talk about whether the company's management and directors needed a major shake-up." Walker urged greater transparency and accountability over the federal government's operations, financial condition, and fiscal outlook.

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At $53 trillion, the total exposure is about 378% of our total gross domestic product (GDP) of $14 trillion.  If you are concerned about our $9 trillion national debt, you should really be concerned about our total exposure of $53 trillion.

As Mr. Walker noted:

"Our government has made a whole lot of promises in the long-term that it cannot possibly keep."

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To restore balance will require raising taxes and reducing benefits. You won't make it by raising taxes alone.  One of the most disappointing features of the current campaign is that many know the truth of these statements, but will do little to act on them.

While no action on these points is forthcoming soon, we will nevertheless not be churlish. Instead, we applaud what passes for action these days, the call for a bi-partisan commission to give our elected representatives the political cover to do what needs to be done.

Rep. Jim Cooper, D-Tenn., said the new report emphasized the need to enact legislation he is supporting that would create a bipartisan commission to make recommendations on overhauling benefit programs and then submit those recommendations to an up-or-down vote in Congress.  "If we don't take action now, it threatens to destroy our social safety net and ruin our economic prosperity," Cooper said in a statement.

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