Government's True Obligations Cut from Budget
June 3, 2003
In order to pass the President's recent $350 billion tax cut, much of the material regarding generational accounting, which shows the true, long-term obligations of the U.S. government, had to be deleted from the budget, says Scott Burns.
The reason? The accounting shows the United States is broke:
- The true obligations of government are 10 times larger than the Treasury debt held by the public.
- The current value of these unfunded obligations is a mind-numbing $43 trillion.
Dr. Jagadeesh Gokhale, a senior economist for the Federal Reserve Bank of Cleveland, suggests that the figures surprised the new Treasury secretary, John Snow, whose first task was to sell the president's tax cut. The sales job would be awkward if an official government document announced we were already $43 trillion in the hole.
The American Enterprise Institute will soon publish a study co-written by Dr. Gokhale and Dr. Kent Smetters. The draft copy does more than lay out the size of the unfunded liabilities of government, explains Burns. It shows how much the current generation is benefiting at the expense of the next.
For instance, it shows that past and current generations of Social Security recipients will receive $8.7 trillion more in benefits than they will pay in employment taxes. Our children and grandchildren will pay $1.7 trillion more in employment taxes than they will receive in benefits.
Source: Scott Burns, "Facts got cut prior to taxes," Dallas Morning News, June 1, 2003; based on Jagadeesh Gokhale and Kent Smetters, "Fiscal and Generational Imbalances: New Budget Measures For New Budget Priorities," AEI Pamphlet, Draft No. 12, Revised April 26, 2003, American Enterprise Institute.
For study text http://www.aei.org/docLib/20030508_gokhale.pdf
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