vvicked0471

2-13-09 | WND


As the Obama administration pushes through Congress its $800 billion deficit-spending economic stimulus plan, the American public is largely unaware that the true deficit of the federal government already is measured in trillions of dollars, and in fact its $65.5 trillion in total obligations exceeds the gross domestic product of the world.

The total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligation embedded in the massive spending plan are taken into account.

The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the "2008 Financial Report of the United States Government" as released by the U.S. Department of Treasury.

The difference between the $455 billion "official" budget deficit numbers and the $5.1 trillion budget deficit cited by "2008 Financial Report of the United States Government" is that the official budget deficit is calculated on a cash basis, where all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur.

But the numbers in the 2008 report are calculated on a GAAP basis ("Generally Accepted Accounting Practices") that include 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.

"As bad as 2008 was, the $455 billion budget deficit on a cash basis and the $5.1 trillion federal budget deficit on a GAAP accounting basis does not reflect any significant money [from] the financial bailout or Troubled Asset Relief Program, or TARP, which was approved after the close of the fiscal year," economist John Williams, who publishes the Internet website Shadow Government Statistics, told WND.

"The Congressional Budget Office estimated the fiscal year 2009 budget deficit as being $1.2 trillion on a cash basis and that was before taking into consideration the full costs of the war in Iraq and Afghanistan, before the cost of the Obama nearly $800 billion economic stimulus plan, or the cost of the second $350 billion in TARP funds, as well as all current bailouts being contemplated by the U.S. Treasury and Federal Reserve," he said.

"The federal government's deficit is hemorrhaging at a pace which threatens the viability of the financial system," Williams added. "The popularly reported 2009 [deficit] will clearly exceed $2 trillion on a cash basis and that full amount has to be funded by Treasury borrowing.

"It's not likely this will happen without the Federal Reserve acting as lender of last resort for the Treasury by buying Treasury debt and monetizing the debt," he said.

"Monetizing the debt" is a term used to signify that the Federal Reserve will be required simply to print cash to meet the Treasury debt obligations, acting in this capacity only because the Treasury cannot sell the huge of amount debt elsewhere.

The Treasury has been largely dependent upon foreign buyers, principally China and Japan and other major holders of U.S. dollar foreign exchange reserves, including OPEC buyers purchasing U.S. debt through London.

"The appetite of foreign buyers to purchase continued trillions of U.S. debt has become more questionable as the world has witnessed the rapid deterioration of the U.S. fiscal condition in the current financial crisis," Williams noted.





"Truthfully," Williams pointed out, "there is no Social Security 'lock-box.' There are no funds held in reserve today for Social Security and Medicare obligations that are earned each year. It's only a matter of time until the public realizes that the government is truly bankrupt and no taxes are being held in reserve to pay in the future the Social Security and Medicare benefits taxpayers are earning today."

Calculations from the "2008 Financial Report of the United States Government" also show that the GAAP negative net worth of the federal government has increased to $59.3 trillion while the total federal obligations under GAAP accounting now total $65.5 trillion.

The $65.5 trillion total federal obligations under GAAP accounting not only now exceed four times the U.S. gross domestic product, or GDP, the $65.5 trillion deficit exceeds total world GDP.

"In the seven years of GAAP reporting, we have seen an annual average deficit in excess of $4 trillion, which could not be possibly covered by any form of taxation," Williams argued.

"Shy of the government severely slashing social welfare programs, federal deficits of this magnitude are beyond any hope of containment, government or otherwise," he said.

"Put simply, there is no way the government can possibly pay for the level of social welfare benefits the federal government has promised unless the government simply prints cash and debases the currency, which the government will increasingly be doing this year," Williams said, explaining in more detail why he feels the government is now in the process of monetizing the federal debt.

"Social Security and Medicare must be shown as liabilities on the federal balance sheet in the year they accrue according to GAAP accounting," Williams argues.

"To do otherwise is irresponsible, nothing more than an attempt to hide the painful truth from the American public. The public has a right to know just how bad off the federal government budget deficit situation really is, especially since the situation is rapidly spinning out of control.

"The federal government is bankrupt," Williams told WND. "In a post-Enron world, if the federal government were a corporation such as General Motors, the president and senior Treasury officers would be in federal penitentiary."

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troublemaker_42

Oh, the wisdom of those we choose to lead us! Why do we act as though someone digging ourselves deeper into debt is the way to financial security as a nation? Thats, simply put, so asinine my 5 yr old nephew can see its hopeless. We've all heard you need to spend to earn, but this is simply rediculous. AS a country, we're about as financially sound as the guy living in a cardboard box behind the 7-11, begging for change (what an ironic statemnt, since the country at large was begging for "change" this last election...little did we know the change we'd all be begging for wouldn't come in the way of new policies and directions, but literally in coins we as a country will collectively be asking for, to buy our way out of the poorhouse)

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Ted Nugent: "To my mind it is wholly irresponsible to go into the world incapable of preventing violence, injury, crime, and death. How feeble is the mindset to accept defenselessness. How unnatural. How cheap. How cowardly. How pathetic."


If total government control equals safety, why are prisons so dangerous?

LowRider

been saying it for a long time, get rid of social programs.

Yana Usdi

There are few things which could get me to consider leaving the country but reverting to a pure Darwinian dog eat dog society with no social safety net would probably be one of them. Yes, we need to get spending under control but we're looking in all the wrong places. It's not the idea of the programs themselves that are the problem but how the programs are run and for who.

I sourced the fact in another thread that we pay twice per capita for health care what other similar nations do and for that they cover everyone and we leave millions uninsured. Why can they do it for half of what we do and cover everyone for that while we can't? Greed, decades of money playing too big a role in politics, and the people who profit from this stuff also writing the rules to serve their interests instead of ours. The day before 9/11 it was revealed that the Pentagon simply LOST somewhere between 2 and 3.5 trillion dollars, that we know of. That detail got lost in the news of the next day so many of us never heard it. In Iraq billions of our money was shipped as cash on pallets and handed out in bundles with little record keeping, they have no clue what happened to a hell of a lot of money there. And so on.

It's not the programs themselves that are the problem. It's that we expect a social program to function when run as a for profit enterprise, we've got too many fingers in the pie and too little accountability for where the money is going or who the program was actually supposed to serve. I don't think it's an accident, I think it's a planned collapse of social systems, or at least expected. Just the latest battle in a war that's been going on since Roosevelt passed some of this stuff, as one of them said not too long ago they just want to reduce the government to a size where they can drown it in a bathtub.

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Isirap

sooo happy im Canadian

toothfairy420

Be glad, but this is effecting you too...this isn't just America's problem anymore, this is a global problem, and I can see much turmoil in the future because of it.

marcusJay

If the US collapses economically so will Canada. The US is Canada's biggest customer and what affects the US has an effect on Canada. Please don't act like you're on a self sufficient island because you're not.