It has been clear for quite some time now that the American economy is in some serious trouble. The stock market and real estate meltdowns of 2008 are still having an effect today, with unemployment rates high, jobs scarce, and average annual salaries failing to keep up with the inflated cost of living. Both the incumbent President and his potential challengers are leaning hard on economic issues in their speeches, and both parties claim a desire and ability to balance the budget and lower the national debt. But in a recent study by researchers at USA Today it was made clear that eliminating the national deficit could be close to impossible. In fact, it would take the average household paying almost the entirety of their average income to the government in taxes to get rid of the budget deficit.
The government puts a number to the national deficit based on a standard set of accounting rules. USA today looked at those computations and realized that during the last fiscal year, the government operated at a loss equating to $42,054 for each household in America. That’s a staggering number, and is also almost four times the amount of debt that was officially reported by Congress. The median income for an American household is currently $49,445, making it crystal clear that it’s probably completely out of the realm of possibility to envision actually eliminating the budget deficit.
But why is there such a disparity between the USA Today report and the official deficit report by Congress? Apparently, Congress does not include any money promised as part of retirement benefits packages. A strange exemption, considering corporations and governments at the local and state levels much include all of those commitments in their financial statements. And including them is required under federal law, as well as by the private boards that generally fix the rules of accounting.
So while the official national budget deficit was declared to be $1.3 trillion in 2011, the actual number is probably more like $5 trillion. The key factors in the expansion of the deficit were liability costs for Medicare, Social Security and all other retirement programs, which rose around $3.7 trillion last year. Yet that number was not added to the federal deficit count.
There were some additional important findings in the USA Today report that deserve review. All in all, it seems that Social Security is the biggest deficit culprit. If the government actually expected to cover all of the benefits promised under the program, both to retirees and people still in the workforce, they would have to set aside $22.2 trillion in an interest-bearing account. That’s almost $10 trillion more than was required just eight years ago. According to this disparity in accounting techniques, the federal deficit over the last seven years was probably six times higher than the $5.6 trillion that was officially reported. And if you really want the truth about the personal toll of these debts, just look at how it would average out per household. Based on the new figures, those retirement commitments added to the federal debt would translate to a debt of $561,254 for every household in America. The average U.S. household already owes around $116,000 in mortgages and other traditional debts. So while people scramble to find accounting resources to help them make up for yearly shortfalls in this down economy, it’s clear that the government isn’t even facing the full truth of the situation.
Evan Fischer is a freelance writer and part-time student at California Lutheran University in Thousand Oaks, California.
Evan, the term you are looking for is unfunded liabilities.
Congress does not include any money promised as part of retirement benefits packages. A strange exemption, considering corporations and governments at the local and state levels much include all of those commitments in their financial statements. And including them is required under federal law, as well as by the private boards that generally fix the rules of accounting.
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Huh? Unbelievable. Credit to USA Today for uncovering the real number.
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Whatever the true figure is, I don’t personally think Romney will be able to erase or lower the deficit any quicker than Obama. While there is certainly excess in the budget that should be cut, it’s not enough to make a big difference in a budget of this size. What we really need is to get the economy turned around and that will depend on factors both within and outside of the President’s and Congress control. But hey, maybe Bill Clinton has a few tips he can pass along to the candidates because those were sweet budget years under his watch! 😉
Anya, USA Today did not uncover this information. Evan incorrectly stated that USA Today did a “study.” Later he states it is a “report.” USA Today simply published the information that is readily available from the GAO and CBO. It has been widely reported in numerous publications for the last several years. Primarily financial and conservative publications.
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Further, the statement that states include their unfunded liabilites in their budgets is blatantly false. Although Evan did not use the term unfunded liabilies. California is one of the worst offenders and it is one of the reasons California has the second lowest credit rating of the 50 states. Illinois currently holds that honor, but California will probably be back in last place soon due to their enormous current budget deficit, along with the astounding unfunded liabilties the tax payers of California are responsible for.
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The three largest state of California public employee pensions have an unfunded liability approaching one trillion dollars. Yes, trillion. California is not accounting for this in their budgets and the shortfall is catastrophic.
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Several municipalities and counties in California are trying to go bankrupt, but it is illegal for states to do so. The horrific situation in Stockton is just the first tremor of the insolvency earthquake which California will experience.
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I’ve read numerous studies and financial analysis of California’s fiscal nightmare and none of have a happy ending.
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True…USA Today only reported the study they did not do it. Why is it so hard to get these people in Congress to CUT SPENDING. Dems think it’s as if it’s wrong to do that and Republicans spend like kids in a candy store when they are in charge. I worry for my Son the Country we will pass on to him.