From the US General Accountability Office. HT – an email from David Lian.
The federal governments financial condition and fiscal outlook are worse than many may understand. Despite an increase in revenues in fiscal year 2006 of about $255 billion, the federal government reported that its costs exceeded its revenues by $450 billion (i.e., net operating cost) and that its cash outlays exceeded its cash receipts by $248 billion (i.e., unified budget deficit). Further, as of September 30, 2006, the U.S. government reported that it owed (i.e., liabilities) more than it owned (i.e., assets) by almost $9 trillion. In addition, the present value1 of the federal governments major reported long-term fiscal exposuresliabilities (e.g., debt), contingencies (e.g., insurance), and social insurance and other commitments and promises (e.g., Social Security, Medicare)rose from $20 trillion to about $50 trillion in the last 6 years.
I am bloody glad I am not a US citizen – that is a lot of years of taxes to pay.
That said, at least the US has the GAO even if the government ignores it. I can’t imagine that Europe is any better off, in fact I believe that they are already further in the red just on pensions. But maybe the US is finally catching up with social democracy :)
We won’t be far behind Patrick. To give Rudd his due, he’s no piker in the Social Democracy Stakes.
Yes I don’t mean to deny him that but thanks to our pension scheme we have an unlosable head start.
Yes, but this form of accrual-based balance sheet doesn’t include the government’s biggest (by far) asset – the power to tax future taxpayers. It makes no sense to include future contingent liabilites without including future contingent assets.
Mind you, if you do include future taxes then you are doing a form of what’s called “generational accounting”. The US and many (not all) European countries have a big problem even if you do the accounts that way.
But we simply do not. That’s the reason Treasury’s Intergenerational Report did not use this approach (despite its name) – the news would have been inconveniently good.
That is right, particularly if you tried to model the effect of rising pension liabilities on the power to tax… Britain is discovering right now that the power to tax is not a unlimited one :)
I’m with DD on this. A lot of this involves an apparently sophisticated way of coming up with a very large number designed to frighten the punters.
As I understand the US contingent social security liabilities this is what the government would have to pay out if they wound up the scheme and paid everyone (current pensioners and current contributors)who had an entitlement the sum of those future entitlements. Not surprisingly this is a very large number, but why would anyone think this was a sensible idea?.
The alternative is to work out how much taxes would have to go up in future to continue to pay pensions as promisedI’m with DD on this. A lot of this involves an apparently sophisticated way of coming up with a very large number designed to frighten the punters.
As I understand the US contingent social security liabilities this is what the government would have to pay out if they wound up the scheme and paid everyone (current pensioners and current contributors) who had an entitlement the sum of those future entitlements. Not surprisingly this is a very large number, but why would anyone think this was a sensible idea?
The alternative is to work out how much taxes would have to go up in future to continue to pay pensions as promised as I recall this is a relatively modest amount.
Paying for future health costs is more challenging, but this is because the US already spends much more than any other country in total and total costs are still increasing relatively rapidly.
I would be very interested in any information you had on that ‘relatively modest amount’!
Perversely, of course, health care expenditure can/should increase pension expenditure which can/should increase health care expenditure which can/should … I think I should get into healthcare.