The dirty secret in Uncle Sam’s Friday trash dump – The Washington Post

The dirty secret in Uncle Sam’s Friday trash dump – The Washington Post.

The dirty secret in Uncle Sam’s Friday trash dump

Bryan R. Lawrence is founder of Oakcliff Capital, a New York-based investment partnership.

Releasing information on the Friday before a big holiday is a time-tested way to bury bad news. So when the Government Accountability Office’s fiscal 2011 financial statements for the federal government were released on the Friday before Christmas, it made sense to read them closely.

Since 1997, the United States has been a rare example of a government willing to publish financial statements using accrual accounting, which counts the cost of promises made as well as cash paid out. And the GAO’s professionalism over the years has won it a reputation for impartiality and effectiveness.

That professionalism is evident in the GAO analysis of the net present value of the Social Security and Medicare promises Washington has made to Americans. “Net present value” means the total that would have to be set aside today to pay the costs of these programs in the future. The government puts these numbers in appendices, rather than in headlines. But the costs are real.

In fiscal 2011, the cost of the promises grew from $30.9 trillion to $33.8 trillion. To put that in context, consider that the total value of companies traded on U.S. stock markets is $13.1 trillion, based on the Wilshire 5000 index, and the value of the equity in U.S. taxpayers’ homes, according to Freddie Mac, is $6.2 trillion. Said another way, there is not enough wealth in America to meet those promises.

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Read the full story here: The Wahington Post

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Filed under medical care, politics, politics, social security, society, USA

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