- What would you think if I told you that 2004's federal
budget deficit was really $615 billion, which is about 30 percent bigger
than you've read in the newspapers?
- Now, what would you think if the Secretary of the U.S.
Treasury told you this?
- After you look at the government numbers I will present
at the end of this column you'll see that President Bush is absolutely
correct in saying that the Social Security system's finances need to be
reformed immediately - although I disagree that privatization is the solution.
- Two weeks ago, the U.S. Treasury posted on its Web site
a financial statement for the country that was compiled in the same way
companies are required to keep their books.
- You can find it at <http://www.fms.treas.gov/fr/04frusg%20/04frusg.pdf>http://www.fms.treas.gov/fr/04frusg
- The Web address alone should provide some hint as to
how inaccessible this information is.
- And, as best I can see, the Treasury didn't issue any
big press release publicizing this information.
- But don't think the government is suddenly becoming forthcoming
with information. This fiscal report, using Generally Accepted Accounting
Principles (or GAAP), is now required by law.
- The news was slipped out just before the holiday season
and the release date was at least three months ahead of schedule.
- In the journalism business these are all signs that someone
doesn't want the public to know something. So, just what could that something
- I'll let John Snow tell you in his own words, contained
in report's prelude that is titled "A Message from the Secretary of
- "In the fiscal year 2004, government revenues were
$1.9 trillion . . . The net cost of the government's operations was $2.5
trillion . . . Total revenues less operating costs resulted in a net operating
cost of slightly more than $615 billion," Snow states.
- I took some words out to make it understandable. Now,
allow me to translate: the government ran a deficit of $615 billion.
- In the missing parts, the Treasury Secretary correctly
said that this was an improvement from the $668 billion deficit that the
government ran in 2003. He correctly added that this was the first gain
in revenue in four years.
- Notice that Snow took great pains to avoid using the
term "deficit." But even a kid with a paper route understands
that when the "net operating cost" - as the Treasury Secretary
calls it - exceeds revenues, that's the definition of a deficit.
- You can be forgiven if you thought that Washington's
budget deficit was "just" $412 billion in the last fiscal year
because that's the number the government puts out in the big press release.
And that's the figure that the media plays up.
- How can there be a $203 billion discrepancy in the numbers?
- It mostly has to do with Social Security costs and cash
vs. accrual accounting. The $203 billion gap (between the $615 billion
"net operating cost" and Washington's officially publicized $412
billion budget deficit) is the amount of Social Security money that the
government collected and used for its everyday operations.
- If you are looking at Snow's statement, turn to the table
on page 11, entitled "Overall Perspective."
- Look at the last line called Total Assets minus Total
Liabilities & Net Responsibilities. The liabilities grew to $45.9 trillion
at the end of 2004, compared with liabilities of $34.8 trillion at the
end of the previous year.
- In other words, what the accountants call the net present
cost of unfunded future obligations grew by a massive $11.1 trillion in
just the past year. That's why Social Security as well as Medicare needs
to be fixed - NOW.