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News of the Day ... In Perspective

08/15/2006

What if the government used audited financial statements?

If the government had to follow the accounting rules it imposes on American business, its financial picture, on which it makes budget decisions, would look far worse than it now does:

  • The $318 billion deficit reported in 2005 would balloon up to $760 billion.
  • The deficit would equal $6,700 for every American household rather than the $2,800 given last year.
  • The running deficit since 1997 would equal $2.9 trillion, rather than the official $729 billion reported by the government.
  • The Clinton administration reported a surplus of $559 billion in its final four budget years; the audited numbers showed a deficit of $484 billion.

In addition, none of these figures counts the financial deterioration in Social Security or Medicare. Including these retirement programs in the bottom line would show the government running annual deficits of trillions of dollars, say observers:

  • The government would have reported nearly $40 trillion in losses since 1997 if the deterioration of Social Security and Medicare had been included.
  • The new Medicare prescription-drug benefit alone would have added at least $8 trillion and could have added up to $11 trillion when combined with other new liabilities and operating losses.
  • The federal government would have had a $12.7 trillion deficit in 2000 because that was the first year that Social Security and Medicare reported broader measures of the programs' unfunded liabilities.

Source: Dennis Cauchon, "What's the real federal deficit?" USA Today, August 3, 2006

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