The real national debt is far worse than you think, critics say
Corporations stressed for cash, he said, would make vague promises payable in the distant future and leave them off the books. “But once they started to put it on the balance sheet and had it flow through the income statement, people started to see how expensive the benefits were.”
In 1990, accounting standards for private business changed, requiring them to put pensions and post-retirement health care on their books. “This caused enormous problems for companies like Ford, Chrysler, the legacy airlines and the steel industry,” Scott said, leading to several bankruptcies and even radical pension restructuring in the private sector.
But for the government, loose accounting continues.
Like Cooper, Scott sees the 2003 Medicare prescription drug benefit, which narrowly passed with Republican support, as a watershed moment in fiscal irresponsibility.
Both the Congressional Budget Office and the Office of Management and Budget, which answers to the White House, priced the bill at $395 billion over a 10-year window, Scott said. But the Medicare actuaries, whose job is to predict the future using today’s data, looked at the same bill and decided that over 75 years it was a $16.6 trillion unfunded liability.
The unfunded liability is the amount of unpaid bills that would remain if current tax and benefits policies continued without change.
"Would a congressman have voted for it if the price tag had said $16.6 trillion?” Scott asked.
A mild-mannered accountant, ITA’s Sheila Weinberg has been fighting the budget transparency battle since the 1990s, when she realized that both parties were making promises they could not fulfill. In 2000, she became incensed when Al Gore wanted to put the budget “surplus” into a lockbox, while George W. Bush wanted to return it to the voters.
“What surplus?” Weinberg asked.
Weinberg really gets piqued when members of Congress “guarantee” Social Security benefits. “It’s a crime to promise people benefits and then not put money aside to pay those benefits,” said Weinberg. In fact, she notes, Social Security by law cannot make payments once the money has run out.
Last year, Weinberg catalogued 42 such “guarantees” on congressional websites. “Social Security benefits may be modest,” reads the website of Rep. Jan Schankowsky, D-Illinois, “but they are guaranteed — unlike retirement savings lost in the Great Recession.”
House Ways and Means Committee Chairman Sander M. Levin, D-Missouri, issued a similar statement on the 75th anniversary of the Social Security Act. "On this 75th Anniversary, millions of Americans can attest to the strength, and value, of Social Security’s guaranteed benefits,” Levin said.
If Weinberg had her way, Levin, Schankowsky and scores of other representatives and senators would be taken to the woodshed for “guaranteeing” to taxpayers benefits the federal financial statements view as not binding obligations.
The real numbers are hiding in plain sight, but to find them you have to look in the fine print of the “Nation By the Numbers” table in the federal government’s Consolidated Financial Statement.
That table shows “total liabilities” of $17.5 trillion in 2011, which combines debt held by the public and binding commitments to veterans and federal employees. But underneath that line in smaller font is a line for social insurance. That item adds $33.8 trillion to the tab. Another miscellaneous line adds $6.4 trillion.
“If you want to see what the total burden that every child born has to pay his share of, it’s the $17.5 trillion plus the $33.8 trillion plus the $6.4 trillion,” said Hal Steinberg, a member of the Federal Advisory Accounting Standards Board, which sets federal accounting standards.
Even the $33.8 trillion is hotly disputed, as auditors, who want real bookkeeping, find themselves at odds with bureaucrats, who want lower numbers.
- University of Phoenix founder dies, leaving...
- Running again? Mitt Romney tells Hugh Hewitt...
- 10 things to know about corporate inversions
- A New York Times article said Michael Brown...
- It's about time the government recognize the...
- UN: Ebola cases could eventually reach 20,000
- Is James Foley a martyr? A brutal death...
- Angelina Jolie, Brad Pitt wed privately at...
- A New York Times article said Michael... 41
- Running again? Mitt Romney tells Hugh... 33
- For the first time in American history,... 30
- 10 things to know about corporate... 27
- Doug Robinson: When did Missouri turn... 24
- Obama back at White House after summer... 17
- Why the poverty cycle is harder to... 15
- Winning plaintiffs in 3 states want... 14