Expressing a Going Concern Doubt on the United States Government, Not According to GAAP
A reality check from John Williams at Shadow Government Statistics.
Statistics generated in Williams' most recent newsletter demonstrate the real 2009 federal budget deficit was $4.3 trillion, not the $1.417 trillion previously reported by the Congressional Budget Office, according to the 2009 Financial Report of the United States Government as released by the U.S. Department of Treasury Feb. 26.
The difference between the $1.417 trillion "official" budget deficit numbers and the $4.3 trillion budget deficit based on data reported in the 2009 Financial Report of the United States Government is that the official budget deficit is calculated on a cash basis in which all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur.
The calculations in the 2009 Financial Report of the United States Government are calculated on a GAAP basis (Generally Accepted Accounting Practices) that includes year-for-year changes in the net present value of unfunded liabilities in social insurance programs such as Social Security and Medicare.
Under cash accounting, the government makes no provision for future Social Security and Medicare benefits in the year in which those benefits accrue.
"The government now does not have the ability to raise taxes high enough to eliminate the deficit in a given year," Williams said.
"The government cannot raise taxes high enough to bring the budget into balance. You could tax 100 percent of everyone's income and 100 percent of corporate profits, and the U.S. government would still be showing a federal budget deficit on a GAAP accounting basis."
What would getting the shit scared out of you be without a handy chart?
Since when does honest accounting matter to the government? ANY government? Anyway, Williams insists (still) that the only possible way out is a doomsday hyperinflation scenario. I'm cool off that view these days, I'm convinced we can drag this out for quite a bit longer before it gets that bad.
GASB has a pretty cush job, it's not like they have to figure out how to make balance sheets balance. But when even the government accounting makes things look bad (see: pensions), you really know you've got a problem on your hands.