The Federal government announced recently that its deficit last year was $1.3 trillion.
If you ran an American company, deficits aren't unusual, though you have to be careful about them. And there are rules you must follow to correctly calculate what deficit (or surplus) your company runs every year.
But the U.S. Government, which enforces those rules on you and every other company in the country, doesn't follow those rules itself.
In fact, if you calculated your finances the way the Federal government does, that same Federal government would throw you in jail for fraud, breach of trust, and half a dozen other crimes.
If you hire an employee and give him a retirement pension in his contract, then every year you must set aside a certain amount of money that will go to pay that pension when he does retire. That amount of money is a legal obligation that you must pay, every year, and it goes on your yearly balance sheet as such. If you don't do it that way, the government will bust you, fine you, throw you in jail, etc... because it's illegal to NOT do it that way.
But guess what - the Fed govt itself, doesn't have to do it that way. They laws they made forcing the rest of us to do it that way, contain an exemption for Congress. They don't have to do it that way themselves. And it's a good thing (or is it?)... because all of Social Security, and a number of other such programs, are being quietly left out of the government's yearly calculation of its deficit.
Did you hear the "official" figure of $1.3 trillion as last year's deficit? Well, if the Fed govt had followed the accounting rules that the rest of us have to, the correct figure would have come out $5.0 trillion. Nearly four times as high.
It's good to be King. When you're King, you don't have to obey the King's rules.
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Real federal deficit dwarfs official tally
Real federal deficit dwarfs official tally
By Dennis Cauchon, USA TODAY
Updated 13h 45m ago
The typical American household would have paid nearly all of its income in taxes last year to balance the budget if the government used standard accounting rules to compute the deficit, a USA TODAY analysis finds.
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 deficit was $5 trillion last year under those rules. The official number was $1.3 trillion. Liabilities for Social Security, Medicare and other retirement programs rose by $3.7 trillion in 2011, according to government actuaries, but the amount was not registered on the government's books.
(Full text of the article can be read at the above URL)
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