Treasury Department accounting is a daunting subject for outside analysis, and as a result, most of us take the government at its word when it comes to financial reporting.
Unfortunately for the public, a lot of that reporting is just spin and wouldn’t pass muster in the private sector. For years, headlines have claimed that our state and city budgets have been balanced, and government websites suggest that the Social Security trust will last for decades. At one point they even said the federal budget not only was balanced, it was running a surplus.
Analysis from Truth in Accounting (TIA), the organization I founded back in 2002, publishes data showing how states carry over $686 billion of pension debt. It wasn’t until last year when the Governmental Accounting Standards Board (GASB) started requiring state and city governments to report all their future pension obligations with greater transparency. Now citizens have most of the truth.
Under the Clinton administration, headlines focused on a balanced budget “as far as the eye could see.” But watchdogs and reporters failed to do their research and accepted this as the truth. If elected officials and politicians did their research, they would have found that the entire surplus came from money borrowed from trust funds and recorded as revenues.
Professor Howell Jackson of Harvard Business School conducted a study that found while the government and media were reporting surpluses, Social Security was running a half of a trillion deficit. How can you run a surplus when a major government program has a massive amount of debt?
Bogus financial reporting continues with statements about the Social Security trust fund having trillions of dollars and that the fund will last for decades to come. A careful look at the federal government’s audited financial report would reveal the truth. The audited financial report states that “the trust fund balances do not represent cash.” The Office of Management and Budget has stated the solvency, or run out date, of the trust fund “is not a meaningful measure of the government’s ability to meet its future obligations.” I would recommend an interview with the Office of the Chief Actuary who has pointed out that Social Security is a pay-as-you-go system and the government doesn’t owe anybody any benefits beyond next month’s checks.
While the amount of federal debt is unsustainable, the $19 trillion still under-reports the magnitude. If Social Security and Medicare promises are included, the debt is more than $96 trillion—with Congress and the President having no idea where the money will come from to pay for $31 trillion of Social Security benefits and $45 trillion of Medicare benefits.
But this is not just about math, the government’s finance and budgeting falsehoods have consequences that taxpayers will feel.
Despite balanced budget claims, 40 states don’t have the money needed to pay their bills and 43 of the 50 most populated cities also have unfunded bills. Seniors, including retired government workers, are counting on retirement benefits, but the money isn’t set aside to pay benefits in certain states and cities. To top it off, the federal government also carries obligations amounting to $308,000 for every man, woman and child in the country.
False claims about financial health have left citizens with an undue sense of security about their entitlement benefits. Taxpayers can’t hold their elected officials accountable and make an informed vote if they don’t have accurate financials and information. Politicians can’t improve policies if they don’t know the true cost of government services and benefits.
Americans deserve the truth. Let’s hope the new president and Congress heard citizens’ cynicism and mistrust this past election and start to publish accurate numbers. Let’s also hope the media will cover the true costs and financial condition of governments.
Sheila Weinberg, CPA, is founder and chief executive officer of Truth in Accounting, a nonprofit organization that researches government financial data and promotes transparency for a better-informed citizenry.
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