MISSING A COUPLE OF TRILLION
June 20, 2005
Blessed by historical habits that have no relationship to what the government does today, our legacy of cash accounting now serves to mislead and confuse, says financial writer Scott Burns of the Dallas Morning News.
The April issue of Economic Indicators, a publication prepared by the Council of Economic Advisers, for instance, projects a unified budget deficit -- the one that lumps the Social Security surplus in with the rest of government -- of $427 billion.
According to Burns:
- The $427 billion deficit, however, is a massive understatement of our true deficit.
- The real deficit is $2.3 trillion larger; that's more than five times the publicly discussed figure, but it never enters public discussion.
This is a bipartisan problem, says Burns. Both the Democrats and the Republicans, in or out of office, have been using accounting methods that are, at best, quaint and, at worst, criminal. And they have been doing it for decades.
Our government doesn't report its long-term pension, disability and health care obligations, says Burns. However, you can find them in the trustees' reports for Social Security and Medicare:
- The 2005 reports (each more than 200 pages) show the programs to be underfunded by $33.7 trillion (in today's dollars) over the next 75 years.
- That's four times the $8 trillion in formal debt shown in regular government accounting.
You learn still more when you compare the 2005 reports with the reports from 2004, explains Burns:
- In 2004, the combined unfunded obligations of Social Security and Medicare were $31.4 trillion.
- That's an increase of $2.3 trillion in a single year; the trustees' examination of the plans over a longer time period, the "infinite horizon," shows an even larger change, $7.2 trillion.
Until more accurate figures are presented, neither party knows that it is talking about or where the country is going, says Burns.
Source: Scott Burns, ?Missing a couple of trillion,? Dallas Morning News, June 5, 2005.
For Economic Indicators text:
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