Whatís our real deficit?
The last week of June was memorable because of the Supreme Courtís Obamacare verdict but another decision by the Governmental Accounting Standards Board (GASB) to completely rewrite the rules for pension accounting and reporting was ignored. Both will have a profound impact.
The GASB ruling requires net pension obligations be included as a liability on balance sheets. What that means is that a typical American household would have paid nearly all its income in taxes to balance the federal budget. Under the new rules, Congressí red ink is equal to $42,000 per household, nearly four times the official number reported. The U.S. Census household median income is $49,450. The difference is that the Congress exempts itself from including the cost of promised retirement benefits. However, companies do include retirement commitments in financial statements but states and municipalities donít.
According to the new rules, the deficit last year would be $5 trillion but Congress and the president say it was $1.3 trillion. What now must be added is the Social Security, Medicare and other retirement program liabilities which amount to $3.7 trillion.
With the new GASB ground rule itís reported the federal debt and retirement commitment equals $561,000 per household compared to the average household debt of $115,000 for mortgages, car loans and other debts. Yet the Senate and the president refuse to cut spending or pass a budget.
We need to get serious and hold the Congress and Obama accountable in November to reflect economic reality. Government needs to live within its means like every household is struggling to do.
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