THE UNITED STATES IS INSOLVENT

[Holly_Hobby]

I've never heard of the author or the website, but it looks authentic to me. The author is editorializing on a report released last Friday by the Treasury Dept. and the OMB.

THE UNITED STATES IS INSOLVENT
by Dr. Chris Martenson
The End of Money
December 17, 2006

Prepare to be shocked.

The US is insolvent. There is simply no way for our national bills to be paid under current levels of taxation and promised benefits. Our federal deficits alone now total more than 400% of GDP.

That is the conclusion of a recent Treasury/OMB report entitled "Financial Report of the United States Government" that was quietly slipped out on a Friday (12/15/06), deep in the holiday season, with little fanfare. Sometimes I wonder why the Treasury Department doesn’t just pay somebody to come in at 4:30 am Christmas morning to release the report. Additionally, I’ve yet to read a single account of this report in any of the major news media outlets but that is another matter.

But, hey, I understand. A report is this bad requires all the muffling it can get.

In his accompanying statement to the report, David Walker, Comptroller of the US, warmed up his audience by stating that the GAO had found so many significant material deficiencies in the government’s accounting systems that the GAO was “unable to express an opinion” on the financial statements. Ha ha! He really knows how to play an audience!

In accounting parlance, that’s the same as telling your spouse “Our checkbook is such an out of control mess I can’t tell if we’re broke or rich!” The next time you have an unexplained rash of checking withdrawals from that fishing trip with your buddies, just tell her that you are “unable to express an opinion” and see how that flies. Let us know how it goes!

...

Read it and weep:
http://financialsense.com/fsu/editorials/martenson/2006/1217.html

[Virginia Dare]

1. Not so shocking if you're even halfway paying attention...n/t

[Hissyspit]

2. Yup. n/t

[depakid]

3. Really

The shocking thing is that people don't get it.

I've thought for several years now that the US would have to default on its debts. There's no way that the economy can recover from the fiscal, trade and monetary mismanagement of the past 6 years.

Once petroleum starts to get really expensive, the gig will pretty much be up.

[BOSSHOG]

4. Hey deficits don't matter, ronald reagan proved it.

So says dick cheney. And if we are insolvent, republicans aren't responsible, just ask any fine upstanding conservative statesmen near a microphone.

[walldude]

15. It's true, they don't matter, because eventually some

Democrat will come along and bail their faux-conservative asses out of the fire again. Then they can yell and scream about how the horrible Democrats raised taxes and put the screws to working Americans, even though it was the Republicans who ran up the defecit.

[BOSSHOG]

16. I think it was Adlai Stevenson who said it best

I'll stop telling the truth about republicans when they stop lying about democrats.

[Red Zelda]

5. Great bumper sticker

Thanks, George

[originalpckelly]

6. The deficit is not 400% of GDP.

Good Lord, why are people posting such stupid bullshit?

If these people are going to fake an article they might as well make it look like it's real. That's obviously false.

GDP is trillions of dollars in our country, the deficit is billions. Even the total debt with it's interest is still less that total GDP.

[Jackpine Radical]

11. Without looking up any numbers, I might guess that they meant

debt, not deficit. The total national debt after 6 years of Bushco could maybe be 4xannual GDP. That's sorta like having a 50k income & a 200k mortgage.

[slipslidingaway]

28. Your guess may be accurate according to this site, fourth chart

down.

http://contraryinvestor.com/2006archives/monov06.htm

[Lucky Luciano]

12. I think total debt would probably equal GDP,

but yes...deficits are not 400% of GDP - if that were so, we would have defaulted a loooooooooooooooooooooooooong time ago. That said, * is still a financial fuckup of course.

[Target_For_Exterm]

13. Au contraire, mon capitan.

The debt is currently more than 8 TRILLION dollars:

http://www.brillig.com/debt_clock/

But you are correct that the GDP is higher. As of 2004, US GDP was 11 Trillion dollars:

http://education.yahoo.com/reference/factbook/us/econom.html

Still, we're working toward the day when the two are a wash. That wouldn't be good.

We're racking up debt at the rate of 1.87 BILLION dollars per day (around 700 BILLION dollars a year). Doesn't take a whole lotta time putting that kind of debt on your credit card to rack up charges to match the GDP. Bush can almost get there by the time he leaves office...

[NobleCynic]

38. But if you consider future obligations that are not as of yet paid for, but already promised

Things like pension plans for public employees, Social Security obligations, etc., the numbers get even uglier.

[Shadoobie]

41. Debt Ceiling

What is the current debt ceiling? And will congress approve another increase now that dems have control?

I wonder what would happen then.

Greg

[Deja Q]

20. Because some people want to prove they are bigger doomsayers than I.

:evilgrin:

The question is, how the hell do we increase GDP? Make more hollywood movies and sell them to other countries?! It's a start. It's about selling products and services. Not giving them away to "nourish" other countries.

Unless the corporate elite believe that putting all on a level playing field will resolve all these problems, which is possible...

But how to pay back the debt... taxation with representation, perhaps?

[leftupnorth]

23. give everybody cancer!!

"The question is, how the hell do we increase GDP?"

Thom Hartmann was discussing the GDP and he said a cancer diagnosis is worth like $150,000 towards GDP. give 100,000 people cancer and !!!bling!!! buttloads more GDP. The way we count money is totally screwed up.

[Holly_Hobby]

31. That may not be too far off

It just cost me $41,000 to get a dianosis on an injury sustained in a rear-end car accident.

[Holly_Hobby]

21. I'm not an economist

I'm sorry. I wanted opinions on what this means, that's why I posted it. Please explain to me why you're so defensive?

[BeFree]

30. Holly

You must understand that some people, when faced with the gawd awful truth, lash out at those who carry the message.

Thanks for bringing this forward. Everyone needs to know how bad off we really are.

[Holly_Hobby]

32. I appreciate that

I just don't get why this poster would try to humiliate me. Is this 7th grade?

We need to get serious - not defensive.

[originalpckelly]

35. I'm not mad at you, not at all...

but this is the third or fourth time I've had to slap down an article which is factually inaccurate.

The debt is about 3/4 one year's GDP. The other parts which this person (the blogger, not you Holly) is talking about are unfunded liabilities, things which we actually have promised Americans, not other countries.

In the absolute worst case scenario, unfunded liabilities are not debt-debt, because we haven't actually spent the money.

I was really more angry with the person whom wrote the article/blog post which you posted.

I'm sorry. :-( Can you forgive me?

[trekbiker]

48. what about SS??

the govt has spent the accumulated funds in the SS trust fund that are supposed to be paid out in future years. SS is supposed to be a funded liability but now is essentially becoming an unfunded liability. The govt will be forced to pay that portion of the national debt owed to foriegners and holders of treasuries, etc. But the special bonds held in the SS trust fund will likely be forfeited upon when our debt and the service on the debt become so large that we cannot pay. Medicare is an unfunded liability and will probably go down first. The govt cannot risk destroying the currency and the world economy by defaulting on foriegn debt. But they could default on the SS bonds declaring some sort of fiscal emergency. Devaluing the dollar out of this mess is probably what will happen but there is no way this level of spending can continue exponentially like it has. We are past the point of no return or we are very near to it. The entire Iraq war is BORROWED MONEY. you can bet China, Europe, Saudi Arabia, and everyone else are actively planning for the demise of the dollar. Raising the SS limit and repealling all of Bush's tax cuts is a start but I doubt it will be enough. No way are we going to be able to grow our economy out of this disaster, its just too big.

[never cry wolf]

43. Did you read the article

That number comes from the Comptroller of the U.S. :

In his accompanying statement to the report, David Walker, Comptroller of the US, warmed up his audience by stating that the GAO had found so many significant material deficiencies in the government’s accounting systems that the GAO was “unable to express an opinion” on the financial statements. Ha ha! He really knows how to play an audience!

In accounting parlance, that’s the same as telling your spouse “Our checkbook is such an out of control mess I can’t tell if we’re broke or rich!” The next time you have an unexplained rash of checking withdrawals from that fishing trip with your buddies, just tell her that you are “unable to express an opinion” and see how that flies. Let us know how it goes!

Then Walker went on to deliver the really bad news:

Despite improvement in both the fiscal year 2006 reported net operating cost and the cash-based budget deficit, the U.S. government’s total reported liabilities, net social insurance commitments, and other fiscal exposures continue to grow and now total approximately $50 trillion, representing approximately four times the Nation’s total output (GDP) in fiscal year 2006, up from about $20 trillion, or two times GDP in fiscal year 2000.

As this long-term fiscal imbalance continues to grow, the retirement of the “baby boom” generation is closer to becoming a reality with the first wave of boomers eligible for early retirement under Social Security in 2008.

Given these and other factors, it seems clear that the nation’s current fiscal path is unsustainable and that tough choices by the President and the Congress are necessary in order to address the nation’s large and growing long-term fiscal imbalance.

[Ioo]

50. This is correct - NOT 400%, Here are the Numbers

According to the Debt clock
8,617,960,887,268.51

http://www.brillig.com/debt_clock/

Current US GDP

13,541,000,000,000.oo

http://www.neatideas.com/gdp.htm
http://bea.gov/bea/dn/home/gdp.htm

This is 61% of one years GDP... this story starts with a very incorrect "fact" so the rest is suspect

[Selatius]

52. They must be including Social Security liabilities.

The government promises benefits through Social Security, so if we use generally accepted accounting principles, we would have to include SS under liabilities, bringing the total debt to over 40 trillion dollars. That's not necessarily bad. What is bad is having cash outflows greater than cash inflows. Either you cut back spending, or you raise taxes to fulfill obligations.

When the government borrows money from the Social Security Trust Fund just to try to mask true annual deficits, at the end of the day, you still have to pay back the money you raided from the Fund. This is why Al Gore talked about a "lock box" in the first place in 2000 because he was objecting to raiding the Fund just to satisfy political objectives.

[shanti]

7. oh, i believe it

when * leaves office, all kinds of things will come to the light, especially this fact. they've been robbing us blind since 2001. this is their best kept "secret".

[kestrel91316]

8. Hey, Dubya: STOP wasting our money on WAR, you a--hole!!!!!

[Ghost in the Machine]

10. a- - holes everywhere are offended

at being used to describe Gee DUHbya...

[jazzjunkysue]

9. Link to the actual report. Can anyone translate this?

http://www.fms.treas.gov/fr/06frusg/06mda.pdf

They make it look all rosey, like the deficit is half what it was.

So, can anyone tell us? Is this gloom or boom?

[Holly_Hobby]

18. The original report, per the author, is here:

http://fms.treas.gov/fr/06frusg/06frusg.pdf

172 pages

[jazzjunkysue]

29. "four times the Nation’s total output (GDP)

"The Nation’s Fiscal Imbalance
While we are unable to express an opinion on the U.S. government’s consolidated
financial statements, the following key items deserve emphasis in order to put the
information contained in the financial statements and the Management’s Discussion and
Analysis section of the 2006 Financial Report of the United States Government into
context. Despite improvement in both the fiscal year 2006 reported net operating cost and
the cash-based budget deficit, the U.S. government’s total reported liabilities, net social
insurance commitments, and other fiscal exposures continue to grow and now total
approximately $50 trillion, representing approximately four times the Nation’s total
output (GDP) in fiscal year 2006, up from about $20 trillion, or two times GDP in fiscal
year 2000. As this long-term fiscal imbalance continues to grow, the retirement of the
“baby boom” generation is closer to becoming a reality with the first wave of boomers
eligible for early retirement under Social Security in 2008. Given these and other factors,
it seems clear that the nation’s current fiscal path is unsustainable and that tough choices
by the President and the Congress are necessary in order to address the nation’s large and
growing long-term fiscal imbalance."

Ok. This sounds really, really bad.

[Throwing Stones]

45. Must compare apples to apples

I'm not an economist, but it does not seem alarming to me that "commitments" surpass total GDP. Isn't this is like worrying because you have a $400k mortgage but only make $100k per year? The mortgage does not have to be paid in one year, nor do the "net social insurance" payments. I'm more alarmed about the fact that the accounting controls are effed up - it wasn't just enron that was culpable in that debacle, but also the accountants of Arthur Andersen who didn't scream about the reporting fictions that enron cooked up.

In reality, the numbers for the federal fisc are more than likely a lot worse, but if the controls don't tighten up soon, the international crisis is going to make the enron bankruptcy look like the failure of a corner mom and pop variety store in comparison - Charlie Rangel has his work cut out for him!

[trekbiker]

49. another analogy would be

the govt situation is like a family that makes $100K a year, owes $400K on a mortgage (future unfunded liability), owes another $70K on credit cards making interest only payments (current debt), and is going hog wild with additional credit cards with no end in sight (annual deficit spending).. the whole thing is so NUTS it's hard to comprehend. Any person this stupid with money would be forced into bankruptcy. But the USA has the world's Fiat currency, the dollar, and now that we are not pegged to the gold standard we can just print away like there's no tomorrow. Any other country that did what we are doing would see their currency crash, like Venezuela, Mexico, Germany, etc. Our time is coming.

[HereSince1628]

14. Save US!!! Give the Rich more tax breaks and take away social programs!!!

We gotta create us some "trickle down!" The GOP is "Laffering" its ass off!

[novalib]

17. BUT THINK OF THE RICH PEOPLE!!!!!!!

Oh My Gaia!!!

JUST THINK of ALL THOSE RICH PEOPLE!!!!

You know -- those people who NEED further TAX CUTS in order to keep our economy going!!

You know -- those people who just CANNOT AFFORD to pay their workers a decent, LIVING WAGE!!!!

What are they going to do???!!!

I SAY THIS --- TAX THE SHIT OUT OF THEM!!!

BRING BACK TAX RATES OF UP TO 90%!!!!

[thingfisher]

19. Here is another take on the budget deficit.

"Congress a few years ago mandated that the Treasury had to report one report each year that used GAAP accounting," Williams told WND. "Then, when you figure in all liabilities including Social Security and Medicare, the real 2006 deficit is huge by comparison. What I expect to show up on Friday is a real federal budget deficit of $3.5 trillion or more, not the $248.2 billion earlier reported."

"Even worse," Williams continued, "the U.S. Government's negative net worth widened to $49.4 trillion in 2005. For the first time, total government liabilities have topped $50 trillion, and the number is continuing to grow. The United States is bankrupt, whether the Bush administration wants to admit it or not."

A quick study of the following table Williams has posted on his website shows the alarming nature of the Bush administration federal budget shortfalls when GAAP accounting methods are used and all Social Security and Medicare liabilities are fully realized.


Source: John Williams, Shadow Government Statistics, on ShadowStats.com

[novalib]

22. IMPEACH THE BASTARDS!!!!!!

THIS is JUST ONE MORE reason why we MUST GET RID OF THOSE BASTARDS!!!!

The current Cabal/Regime of THUGS and LIARS has BANKRUPTED this country!!!

HOW did they do it???!!! TAX CUTS FOR THE WEALTHY!!! and an ILLEGAL AND IMMORAL WAR OF AGGRESSION!!!!

WHY did they do it???!!! To take care of their FAT CAT CRONIES!! and TO keep the poor people DOWN!!! And to DRIVE EVERY ONE ELSE to POVERTY!!!!!!

IMPEACH THEM ALL NOW

[in_cog_ni_to]

37. AND...the SOBs were left with a SURPLUS when Clinton left office!

They spent THAT then borrowed and borrowed and borrowed and borrowed and borrowed. Just WAIT until the people get the real report on what these rat bastards have been doing. They will be DEMANDING IMPEACHMENT.

[Holly_Hobby]

33. This really pisses me off

I'm a bookkeeper, have been for 26 years. If I didn't follow the accepted accounting rules, the IRS would not only prosecute my employer, but prosecute me AS WELL.

1 plus 1 equals STILL equals 2. How can they change the bookkeeping rules AND GET AWAY WITH IT?

[Wednesdays]

44. It's essentially the Enron model...

Cook the books and tell everybody everything's rosey, while in reality all is going to hell in a handbasket. :(

[KAT119]

36. This gov't is keeping 2 sets of books per Lou Dobbs' show.

An Economist recently told Lou that the Federal Budget site says the US is $8 Trillion in debt, while the accurate set of books declares that is over $43 Trillion!!

The entire world is aware that we canno longer pay our debts/creditors (though the federal printing presses are printing "funny money" 24/7 that no one, esp. China/Japan trusts since the gov't refuses to declare MP3
records).

We remember that * inherited a relatively peaceful world, a budget SURPLUS and our country was respected world-wide(mostly-save for the CIA overthrowing democracies in favor of dictators we could control).

[eridani]

24. More than time to get economics connected back to physical reality

How about a new monetary unit, the kilocalorie?

As a society, we can do whatever we want, subject to certain limitations. To do X, we have to have the raw materials, the kilocalories and the human knowledge base. Given the effects of X on the environment and on human society it may or may not be a good idea to do X, but the three parameters specified tell us whether or not we CAN do it.

[Gregorian]

25. For Sale- One White House (fixer upper).

Last tenant left without paying back rent for six years. Dogged stained carpets, and lawns ruined by helicopter landings and Secret Service goons. Sale is "as is".

[damntexdem]

26. That's the bad news. Here's the good news:

we owe so much that our creditors don't dare do anything about it because .......... we owe them so much.

Chine? We're their big customer. As a purely-economic decision, they cannot cut us off. Of course, should it come to a political decision, and should that overrule economics, well .................. then, no more good news.

[Yavin4]

27. A Good Bookie Never Kills His Top Deadbeats

He just strings them along, just long as he gets something from him, from time to time.

[Holly_Hobby]

34. Thank you.

I'm so naive. I need to be led by the hand. Thanks. Seriously.

[talk hard]

39. I think thats exactly how they planned it.

Bankrupt the country, axe what they call entitlements.

[Ian_rd]

40. The solution: More tax breaks for the rich! Duh!

It sounds like a conspiracy theory, but when you step back and look at the big picture of Republican policy, you can see that the wealthly elites' opinion of the purpose of government is to channel public wealth into their own bank accounts, and widen the gap between themselves and the undeserving working rabble of society.

I doubt many of them would argue with this view. They see themselves as the champions of our society. They feel they are entitled to ever lower taxes, including for income requiring no labor or contribution to society, and no-bid contracts, etc. because only they can be trusted to move our economy forward with their benevolent wealth. And when they see the fruits of their policies, as in the article above, their answer is always the same: "Well you see, silly liberal, the only way to fix that problem is by reducing my tax burden even more, getting those lazy social security queens off the roles, and allowing me to export more jobs overseas."

[DaveJ]

42. Problems with that POV

I know you are being facetious, but here are the fallacies in that Neocon perspective:

"getting those lazy social security queens off the payroll"
Truth: Americans are working harder than ever in history and the deficit is still higher than ever.

"They see themselves as the champions of our society"
Truth: They are average people just like anyone else, but less than average really since most of them are bottom feeders, leaches, amoral profiteers.

I think the real reason that Americans are fiscally enslaved is because government believes in the X management theory, not the Y management theory. They think that given the choice we will play all day instead of work. This may be true for some, but everyone should not be punished because of it.

[pdrichards114]

46. The Dr. writing this obviously doesn't understand accounting or economics.

First off I wonder what his Doctorate is in.

There are budget deficits; this is a one year period where income is exceeded by expeditures. This deficit is generally covered by borrowing money. Which then contributes to....

The national deficit; the total accumulation of all borrowed money.

Finally, the U.S total liability. The total of all debts and promised payments. This is what gets fuzzy and where distinctions get blurred. It is more an actuarial number than a real, physical debt. It is an estimate of what, in today's dollars, we owe if all our future debt was payed today.



For all out in blogosphere land, to get a better understanding of how badly we are getting fucked, start looking at your city, county, state's CAFR(Comprehensive Annual Financial Report).

It is mandated by law and shows the balance sheet and income statement for your respective municipality.

Bottom line, the Govt. has two lines of business. Govt. type activties and business type activites. When you hear about Budget deficits, find out whether they are including the revenue streams as well. Chances are the Gov't is not.

Example, I live in Portland, Oregon. Last year the city raised property and business taxes to cover a supposed shortfall in the budget to pay for the schools. But when I looked at the City's CAFR, for the prior year, the city did not lose money. When the business activities and the Gov't activities were added up the city made over $400 million.

If you want any more information or direction to look this information up on your own, please write to me.

[nam78_two]

47. kick.nt

[Melynn]

51. The country's broke? But...but how can that be??????

I mean the Republicans are the party of fiscal discipline, aren't they? They tell me they are. So they must be. :sarcasm:

God, how many years is going to take to undo the damage that Bush has done? Or maybe the question should be can the country be saved?