In an article from Reuters, David Lawder reports that a new U.S. Treasury report of cash holdings, “The Financial Report of the United States,” shows that the U.S. government went into greater debt in fiscal year 2010 to the tune of additional $2 trillion. Unfortunately, the report does not include the massive land, minerals, waterways, patents, buildings, transportation, and other assets owned by the federal government nor does it include the long-term projections for government employee pensions and benefits and such “entitlement” programs as Medicare, Medicaid and Social Security. Nevertheless, the report is a further indication of the looming train wreck ahead and the dire need to radically cut federal spending across the board. As the article notes:
The Financial Report of the United States, which applies corporate-style accrual accounting methods to Washington, showed the government’s liabilities exceeded assets by $13.473 trillion. That compared with a $11.456 trillion gap a year earlier.
Unlike the normal measurement of government intake of receipts against cash outlays, accrual accounting measures costs such as interest on the debt and federal benefits payable when they are incurred, not when funds are actually disbursed.
The report was instituted under former Treasury Secretary Paul O’Neill, the first Treasury secretary in the George W. Bush administration, to illustrate the mounting liabilities of government entitlement programs like Medicare, Medicaid and Social Security.
The government’s net operating cost, or deficit, in the report grew to $2.080 trillion for the year ended September 30 from $1.253 trillion the prior year as spending and liabilities increased for social programs. Actual and anticipated revenues were roughly unchanged.
The cash budget deficit narrowed in fiscal 2010 to $1.294 trillion from $1.417 trillion in 2009. But the $858 billion tax cut extension package enacted last week is expected to keep the deficit well above the $1 trillion mark for another year.
BUDGET CUT DEBATE
The latest Treasury report should fuel debate in Congress over spending cuts next year as a new Republican majority in the House of Representatives takes office.
The U.S. Senate on Tuesday approved a compromise bill to fund the government until March 4, 2011. After that, Republicans will have the chance to push through dramatic budget cuts.
“Today, we must balance our efforts to accelerate economic recovery and job growth in the near term with continued efforts to address the challenges posed by the long-term deficit outlook,” Treasury Secretary Timothy Geithner said in a letter accompanying the report. “The administration’s top priority remains restoring good jobs to American workers and accelerating the pace of economic recovery.”
Among key differences between the operating deficit and the cash deficit were sharp increases in costs accrued for veterans’ compensation, government and military employee benefits and anticipated losses at mortgage finance giants Fannie Mae and Freddie Mac.
The biggest increase in net liabilities in fiscal 2010 stemmed from a $1.477 trillion increase in federal debt repayment and interest obligations, largely to finance programs to stabilize the economy and pull it out of recession. . . .