If the U.S. government used the same accounting methods that most U.S. businesses use, the real federal budget deficit for last year would have been 5 trillion dollars instead of 1.3 trillion dollars. So where does the huge difference come from? I think a simple illustration would be helpful here. When you go shopping, do you only count the transactions where you use cash, or do you also count the transactions where you signed on the dotted line and promised to pay later? Of course you count both of them. Well, the U.S. government does not count promises to pay later when calculating budget deficits. The “official” Obama budget deficit for 2011 was 1.3 trillion dollars, but according to USA Today when you add in the rise in liabilities for Social Security, Medicare and other retirement programs that adds another 3.7 trillion dollars to the total. Those are future financial promises that we have made that future taxes are not expected to cover. This analysis by USA Today squares very well with what analysts such as John Williams of shadowstats.com have been saying for years. The truth is that our federal budget deficits have actually been far worse than we have been told.
If the U.S. government was a publicly traded stock, it would be forced to use GAAP – Generally Accepted Accounting Principles.
Sadly, as USA Today explained, the real budget deficit for 2011 would have been almost four times as large as was officially reported if standard accounting practices had been used….
Under those accounting practices, the government ran red ink last year equal to $42,054 per household — nearly four times the official number reported under unique rules set by Congress.
A U.S. household’s median income is $49,445, the Census reports.
The big difference between the official deficit and standard accounting: Congress exempts itself from including the cost of promised retirement benefits. Yet companies, states and local governments must include retirement commitments in financial statements, as required by federal law and private boards that set accounting rules.
The amount of red ink the federal government ran up in 2011 alone was almost equal to median household income.
How much worse can things get?
Unfortunately, we have become a nation that is completely and totally addicted to debt.
We have no idea how to live within our means.
Right now, the mainstream media in the United States is freaking out about the “fiscal cliff” that we are approaching in 2013.
In essence, a bunch of tax cuts are scheduled to expire and a few spending cuts are scheduled to kick in.
Everybody is deeply concerned about what such “austerity” could do to the struggling U.S. economy.
In fact, we could even enter another recession if something is not done according to the Congressional Budget Office….
Under those fiscal conditions, which will occur under current law, growth in real (inflation-adjusted) GDP in calendar year 2013 will be just 0.5 percent, CBO expects—with the economy projected to contract at an annual rate of 1.3 percent in the first half of the year and expand at an annual rate of 2.3 percent in the second half. Given the pattern of past recessions as identified by the National Bureau of Economic Research, such a contraction in output in the first half of 2013 would probably be judged to be a recession.
Well, yes, if taxes rise and government spending is cut it will probably trigger another recession.
That is what “austerity” does. It causes economic growth to slow down. Just look at Greece. They have had five years of austerity and now they are in a full-blown economic depression.
But can we really afford to continue stealing trillions of dollars from future generations just to make short-term economic conditions better?
This is what I wrote about the other day. The U.S. economy has not stabilized because Obama is an economic genius. It has stabilized because he has stolen trillions of dollars from future Americans in order to make the economy look better in the present.
This was explained further in a recent article by Peter Schiff….
From 2008 to 2009 our national GDP (of around $14 trillion) contracted by $212 billion. To prevent any further dips, the government aggressively spent, borrowing heavily to do so. To the relief of just about everyone, these moves did stop the nominal contraction. From 2010 to 2011 the U.S. GDP expanded by $502 billion, and from 2011 to 2012 it added an additional $508 billion. All told, from the end of 2008 the U.S. economy added a cumulative $798 billion in GDP. But those gains came at a very high price.
The combined federal deficits for the same time frame come in at a staggering $4.2 trillion! In 2009 alone the feds chalked up a chart breaking $1.4 trillion in debt (the deficit was a mere $161 billion in 2007). In other words, we borrowed five times more than we grew. This “strategy” for growth is no different from an individual who loses half his income, but continues to spend by running up credit card debt. Could this be described as economic growth? But that’s just how we are describing our current economy, and for the large part, expert economists, politicians, investors, and academics all agree.
We don’t have real economic growth in America today.
What we have is debt-fueled prosperity. Without unprecedented borrowing by the federal government we would be in a full-blown economic depression right now.
So where in the world is the U.S. government getting all of this money? Well, the truth is that most of it appears to be coming from the Federal Reserve. During 2011, the Federal Reserve bought up approximately 61 percent of all government debt issued by the U.S. Treasury Department.
The Fed is doing all of this buying in a desperate attempt to keep interest rates low.
It is a Ponzi scheme that cannot last too much longer.
But most Americans have no idea how close to the edge we really are.
Most Americans just assume that we will have prosperity forever because that is what always happens in America.
They don’t bother to look at the man behind the curtain.
They don’t bother to notice that Barack Obama is stealing 150 million dollars an hour from our children and our grandchildren so that we can continue to enjoy our inflated standard of living.
Please wake up America.