In Fiscal Year 2013, the official federal deficit was $680 billion. Liberals have cheered this drop while subsequently ignoring how this deficit is both larger than all of Bush’s pre-recession deficits and is expected to grow dramatically over the next several decades.
However, the Treasury Department’s annual report on the finances of the U.S. federal government shows that not only is $680 billion an incomplete measure of the federal government’s finances, it’s off by nearly a factor of five.
The U.S. Treasury has just released its annual “Financial Report of the United States Government,” which provides an account of the federal government’s finances using accounting standards like those that the government requires of large corporations. Because the federal budget is not bound by these standards, it does not have to account for all of its fiscal obligations.
For example, the Treasury report reveals that the federal government owes $6.5 trillion in retirement and health benefits to federal employees and veterans. This legal responsibility amounts to $53,000 for every household in the United States, but none of these liabilities are reflected in the 2013 budget deficit or national debt.
During the federal government’s 2013 fiscal year, the official federal deficit was $680 billion, but this comprehensive accounting reveals that the federal government’s fiscal position deteriorated by $3.3 trillion or an average of $27,000 for every household in the U.S.
There are two basic ways the federal government calculates its obligations. The first does not account for the obligations of Social Security, Medicare, and other programs in the same way the federal government requires of private corporations.
The method the Treasury report uses is far more complete. It includes long-term obligations and liabilites unaccounted for in the deficit and debt measurements.
In this year’s report, Treasury says the government should initiate deficit reduction measures (cuts and/or tax increases) equivalent to 1.7 percent of GDP every year for 75 years. This means, just in 2014, Treasury is recommending a cut in deficits of approximately $274 billion just to prevent a fiscal crisis – and these cuts will grow in size every year for the time period Treasury examined. Waiting 10 or 20 years makes things even worse.
And even these cuts are grossly undersized. First, this would still leave America’s publicly held debt-to-GDP ratio the same as it was in 2013, which the Congressional Budget Office has said is problematic.
Additionally, Treasury assumes in its report that the Affordable Care Act will reduce long-term health care costs. And, finally, these cuts are recommended to reduce “primary” deficits, those that do not include the enormous interest payments the federal government is expected to incur.
In short, not only is the federal government in financial trouble, it’s in worse shape than we ever realized. After compiling all of the data in the Treasury Report, Just Facts found that the full obligations of the U.S. federal government total $71 trillion, or $580,000 per household.