Federal government finances deteriorated by $6.5 trillion in 2012
In January 2013, the U.S. Treasury released its annual "Financial Report of the United States Government," which presents an "accrual" accounting of the federal government's finances. In contrast to the White House budget, which primarily uses "cash" accounting, this Treasury report uses accounting standards like those that the government requires of large corporations.
Based on this newly published data, Just Facts calculates that our national government has $67.4 trillion in debts, liabilities, and unfinanced Social Security/Medicare obligations. This represents a significant deterioration over the past year. Although the official federal deficit for fiscal year 2012 was $1.1 trillion, this comprehensive accounting reveals that the federal government's fiscal position deteriorated by $6.5 trillion—or an average of $53,000 per household.
Beyond the commonly cited national debt, the accrual accounting methods used in this Treasury report account for other federal financial obligations, such as retirement and healthcare benefits for federal employees, liabilities from government-sponsored enterprises (like Fannie Mae and Freddie Mac), and obligations to current participants in Social Security and Medicare that exceed the programs' dedicated revenues.
The report also accounts for federal government assets, such as cash on hand, certain properties and equipment, and stocks in companies such as General Motors. The report, however, does not account for federal stewardship land and heritage assets, such as national parks and the original copy of the Declaration of Independence. While these items have tangible value, the report explains that the government "does not expect to use these assets to meet its obligations."
In total, the federal government's comprehensive fiscal shortfall now equals $214,000 for every person living in the U.S. or an average of $557,000 per household. The precise methodology for computing these figures is detailed in Just Facts' national debt research, which will soon be updated with this new data. This research also shows that this shortfall is based upon federal agency projections that incorporate some highly optimistic assumptions. As such, the true shortfall may be considerably worse.
The Reality of the Federal Government's Fiscal Hole
Consequences of the National Debt
Paul Krugman's claims about the dangers of government debt
James D. Agresti is the president of Just Facts, a nonprofit institute dedicated to researching and publishing verifiable facts about public policy.
*Image Source: Hafezi Capital