Robert Samuelson, with an article titled "The True National Debt," reported in Newsweek of February 25, 2013, the following five categories of federal debt:
1. TREASURY DEBT HELD BY THE PUBLIC: $11.3 trillion
2. GROSS FEDERAL DEBT: adds securities issued to government trust funds. Samuelson notes that "Economists dislike this debt concept, because the trust-fund Treasury securities represent one part of the government owing another. It's comparable to lending yourself money. Congress could cancel these debts, though it almost certainly won't. The trust-account Treasury securities represent political commitments more than financial obligations." This is an economist talking his usual nonsense. An accountant says that these are reasonable and expected obligations that would only change with unexpected changes in federal law. Unless the issuing agency has a fully-funded sinking fund, and the agencies don’t have that, accrual-based accounting requires the inclusion of these obligations in the gross debt.
3. FEDERAL LOANS AND LOAN GUARANTEES: $2.9 trillion in 2011
4. FANNIE AND FREDDIE: $5.1 trillion
5. THE FEDERAL DEPOSIT INSURANCE CORPORATION: $7.3 trillion
This adds up to federal debt of about $33 trillion – not including underfunded entitlement programs.
Samuelson smugly notes:
"So the most expansive measure of national debt ($31 trillion) is nearly three times the conventional estimate ($11 trillion). Almost all the items on my list -- whether Treasury bonds or bank deposits -- are ultimately legal obligations of the federal government. Note: They differ from Social Security and Medicare benefits, which are often called "debts." They aren't. Congress can alter the benefits anytime it chooses."
Samuelson is full of shit. He should know this, he probably does, but his political views trump what little he knows about money, how to count it and how to report it accurately. Social Security and Medicare are what an accountant would call "grossly underfunded." If we take the value of the promises made for these programs over the next 75 years (discounted by present value to the present time) and subtract the tax income expected for these programs (also discounted by present value to the present time), then you get a net present value figure called net unfunded debt. Any corporation reporting annual financial information and listed on any stock exchange in the USA would be required to report this net unfunded debt as part of FASB 86 and FASB 106. The failure to do so would be a federal felony. But the federal government exempts itself from the net unfunded debt of Social Security (above $20 trillion) and Medicare (above $25 trillion). The government – and Congrerss – are intentionally underinforming the public about the unsustainability of these underfunded programs.
Samuelson speciously notes that Congress could act to end Social Security or Medicare and therefore there are no economic consequences of underfunding. Shit. Absolute shit.
1. TREASURY DEBT HELD BY THE PUBLIC: $11.3 trillion
2. GROSS FEDERAL DEBT: adds securities issued to government trust funds. Samuelson notes that "Economists dislike this debt concept, because the trust-fund Treasury securities represent one part of the government owing another. It's comparable to lending yourself money. Congress could cancel these debts, though it almost certainly won't. The trust-account Treasury securities represent political commitments more than financial obligations." This is an economist talking his usual nonsense. An accountant says that these are reasonable and expected obligations that would only change with unexpected changes in federal law. Unless the issuing agency has a fully-funded sinking fund, and the agencies don’t have that, accrual-based accounting requires the inclusion of these obligations in the gross debt.
3. FEDERAL LOANS AND LOAN GUARANTEES: $2.9 trillion in 2011
4. FANNIE AND FREDDIE: $5.1 trillion
5. THE FEDERAL DEPOSIT INSURANCE CORPORATION: $7.3 trillion
This adds up to federal debt of about $33 trillion – not including underfunded entitlement programs.
Samuelson smugly notes:
Samuelson is full of shit. He should know this, he probably does, but his political views trump what little he knows about money, how to count it and how to report it accurately. Social Security and Medicare are what an accountant would call "grossly underfunded." If we take the value of the promises made for these programs over the next 75 years (discounted by present value to the present time) and subtract the tax income expected for these programs (also discounted by present value to the present time), then you get a net present value figure called net unfunded debt. Any corporation reporting annual financial information and listed on any stock exchange in the USA would be required to report this net unfunded debt as part of FASB 86 and FASB 106. The failure to do so would be a federal felony. But the federal government exempts itself from the net unfunded debt of Social Security (above $20 trillion) and Medicare (above $25 trillion). The government – and Congrerss – are intentionally underinforming the public about the unsustainability of these underfunded programs.
Samuelson does not mention federal pensions. A lot of these are military pensions. The unfunded debt for those federal employees is $10 trillion or more.
Samuelson does not mention that the federal government reformed large private pensions (ERISA) in 1972 and set up a pension guarantee program that would bail out the pensions of large private organizations if they go broke. A lot of them will. The underfunded guarantee balance is short about $20 trillion.
We are now at $108 trillion in federal debt and counting.
Federal Reserve Chairman Ben Bernanke made about $9 trillion in secret guarantees to corporations, state governments, localities, banks, foreign governments and foreign corporations late in 2008 and early in 2009 to avert a worldwide crisis. The U.S. Senate, controlled by Democrats, refuses to audit the Federal Reserve, so I can’t put a reliable figure on the debt value of the guarantees and electronic money involved in Bernanke’s shady deals.
We’ve got about $117 trillion in federal debt and public guarantees based on a GDP of $15.5 trillion annually. We’re broke. We have to freeze Social Security and cut Medicare. Now. The longer we wait the more painful we’re going to have to make the cuts. The failure to act means probable hyperinflation for America.
MORAL: regarding debts and money, always trust a certified public accountant over the hopelessly politicized economics "profession."
Additional references for your information:
The Coming Generational Storm: What You Need to Know about America's Economic Future by Laurence J. Kotlikoff, Scott Burns
Comeback America: Turning the Country Around and Restoring Fiscal Responsibility by David M. Walker [a CPA and former Comptroller General of the United States and former head of the Government Accountability Office]
Samuelson’s article is from:
http://www.realclearpolitics.com/articles/2013/02/25/the_true_national_debt_117137.html
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