D. Dowd Muska


D.C.’s Annual Report: Read It and Weep

January 05, 2012

At 254 pages, the “2011 Financial Report of the U.S. Government” won’t be perused by more than a handful of Americans.

Too bad. If just a few million taxpayers gave the document the time is deserves, the wilting tea-party movement would receive a much-needed injection of volunteers and donations.

Released on a Friday, and two days before Christmas -- smart PR tactic -- the report closes the books on the federal government’s fiscal year that was. (FY2011 ended on September 30.) In an introductory message, Treasury Secretary Timothy Geithner, whose department is tasked with publishing Washington’s annual balance sheet, called it “another sobering picture of our long-term fiscal challenges.”

The secretary, politically motivated as any cabinet appointee, wasn’t willing to acknowledge that the short-term view isn’t encouraging, either. In FY2011, our profligate fedpols ran a deficit of $1.299 trillion, nearly unchanged from FY2010’s gap. Not one of Uncle Sucker’s 35 “significant reporting entities” has been eliminated during the “austerity” of the Great Recession. The Department of Agriculture, Department of Commerce, Department of Education, Department of Energy, Small Business Administration, and National Aeronautics and Space Administration are still in operation. Neither the U.S. Postal Service nor the Tennessee Valley Authority have been privatized. Even the small fry -- e.g., the Marine Mammal Commission, Barry Goldwater Scholarship and Excellence in Education Foundation, Corporation for National and Community Service, African Development Foundation, Eisenhower Exchange Fellowship Program, Patient Centered Outcomes Research Trust Fund, Japan-United States Friendship Commission, Ronald Reagan Centennial Commission, Office of the Federal Coordination for Alaska Natural Gas Transportation Projects, Open World Leadership Center, and Morris K. Udall Scholarship Foundation -- remain sacrosanct.

But Geithner’s not wrong about the future. FY2011 saw “publicly held debt” hit $10.2 trillion. A further $5.8 trillion was owed to nonmilitary employees and veterans for retirement benefits. Tack on another $4.7 trillion for “intragovernmental debt,” which “arises when one part of the Government borrows from another.” This unique obligation takes the form of “special nonmarketable securities” deposited in “trust funds.” Such “investments” are “both liabilities of the Treasury and assets of the Government.” (Yes, you’re correct: That doesn’t make even a smattering of sense.) Washington’s also on the hook for its longstanding loan-guarantee programs, as well as the breathtakingly dunderheaded corporatist schemes launched since 2008’s economic meltdown. And the military-industrial complex isn’t exactly sure what the cost will be to remediate environmentally contaminated installations and equipment.

Where we are is scary. Where we’re going is terrifying. Driven by nationalized pensions and the federal government’s ongoing destruction of a once well-functioning healthcare marketplace, the bill for unfunded liabilities has risen to an almost incomprehensible figure. Simply put, the welfare programs for the elderly that Boobus americanus considers to be “insurance” are outrageously unaffordable.

Wonks call it the “fiscal gap,” and it’s the difference between revenue and expenditures over a 75-year period. As of January 1, 2011, the burden for Social Security and Medicare was $34 trillion. Treasury admits that the sum is “an increase of approximately $3 trillion” over 2010’s estimate. Absent dramatic reforms, the welfare state will consume an ever-greater share of the economy. Remember: Old people vote. With insufficient tax revenue to transfer to the greedy-geezer lobby, borrowing will balloon. Publicly held debt will swell to 287 percent of GDP in 2086 -- a share that will make Greece in 2012 look like America during the Coolidge administration.

A final note about Treasury’s horror show. For the 15th year in a row, it failed to meet the standards of the Government Accountability Office. The GAO provides investigative services to Congress, and is legally bound to audit D.C.’s books. What did the legislative branch’s green-eyeshade watchdogs conclude about FY2011’s numbers? Due to an “inability to demonstrate the reliability of significant portions of the U.S. government’s … accrual-based consolidated financial statements … principally resulting from limitations related to certain material weaknesses in internal control over financial reporting and other limitations on the scope of our work, we are unable to, and do not, express an opinion on such accrual-based consolidated financial statements.”

Incompetence piled atop incompetence. The federal government cannot accurately itemize its insolvency.

The solution to all these problems -- short-term debt, long-term obligations, woefully unacceptable transparency and accountability -- is to restore the kind of tightly constrained central government that befits a nation of free men.

It’s a right-sizing that’s politically impossible today. But each year will bring another dense report that further depicts America’s inevitable fiscal Armageddon. It’s obvious that fedpols don’t read them. Perhaps taxpayers will start.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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