Tuesday, June 7, 2011

Eliminate Bernie Madoff Style Accounting and the Real US Debt is $61 Trillion

When the U.S. government reports its debt, it does not include payment that it is required to make to   seniors, veterans and retired employee. If those were included, as they should be, the US debt would be an far greater number than the already outrageous number the government does publish.

 Accountant Sheila Weinberg, founder of the Institute for Truth in Accounting, has done the accounting correctly and has come up with these numbers: Total US debt $61 trillion, which comes out to $534,000 per household.

These numbers provide a picture of why the debt is really such a big problem. No way, no how can it be paid off, given the simple fact that most households don't have $534,000 to turn over to the government.

Default is really the only long-term option. It will be done either in straightforward fashion, where the government pays pennies on the dollar for what it owes. Or it will be done in stealth fashion by the Fed printing up dollars to pay for the government obligations, which will create huge price inflation that will screw the average worker and also those on fixed incomes such as retirees.

19 comments:

  1. Enron's gone.

    Madoff is rotting in jail.

    Who would the moron accountants work for?

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  2. Not to mention that government pension plans routinely overstate their holdings and understate their liabilities.

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  3. You have to be really careful here stating that future commitments for Social Security and Medicare should be added to the national debt. Contrary to what people believe and what the government wants people to believe, future commitments under social security and Medicare are not contractual liabilities. A simple act of legislation could reduce or even do away with them. They certainly are not the same as a pension liability or a debt instrument that can’t be legislated away (yet).

    The accounting issue really arises from the way the government likes to pretend that these are “trust funds” that are holding assets as a trustee for each individual the taxpayer. The SS statement you get each year even makes it appear as though these amounts are sitting in an account with your name on them. That statement is not only misleading, it should be considered fraudulent. They are trying to assert the appearance of a contractual liability when none exists. The money that taxpayers paid in has been spent and the government technically owes them nothing in return. Of course, no politician would ever put it this way.

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  4. First, to anonymous at 4:07PM, point taken. But I certainly would not bet any of my money on the government actually cutting or eliminating any of the unfunded liabilities. Look at what happened to Jane Corwin in New York because she supported the Paul Ryan budget slashing(read: modifying) "plan". It is political suicide to not follow through on these promises no matter how unsustainable they are in reality.

    Second, I have a question regarding this issue of unfunded liabilities and Japan. It seems that many economic commentators(ie: Mish Shedlock) point to Japan as an example of what the US can expect as far as the economy is concerned. They frequently list Japans staggering debt-to-GDP ratio as an example of how Japan was in worse shape than the US is in now when they entered their "lost decade". My question is this: In their Debt-to-GDP ratio figure, does Japan factor in unfunded liabilities or do they leave them out as the US does? Does Japan even have any unfunded liabilities along the lines of Social Security or Medicare/Medicaid? I think these are important factors to consider.

    Thanks,
    Tim

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  5. True, anon@407PM.


    "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." Ludwig von Mises

    So many of the posts today have reminded me of this quote I have been pondering the quote a bit today, and the final implications. Even if it's just 200k per household, or 100k, it's still non-performing debt that takes a chunk out of taxpayers. It cannot be sustained without fundamental financial reform, and since that's not happening the final and total catastrophe is eventually going to happen.

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  6. We do have a debt problem that I think will destroy us, no doubt. HOWEVER, Social Security is not part of the problem since it is paid for as we go by the payroll tax (except for right now since they cut that by 2 percentage points, or about 33% of your share).

    ALL OTHER government expenditures are unfunded - that is they do not have a tax specifically to cover their costs.

    SS can be made robust and sound by merely raising the payroll tax to maybe 8 or 9% from the current 6.2% and cutting SS paychecks maybe 10%. I think modest measures like those will probably fix it. The evidence I provide is at least as good as the evidence in this article claiming a $61 trillion debt. Over how many years, Einstein?

    This type of scare tactic is made by 2 types of people: 1) those too stingy to put their contribution in the pot for the benefit of all, but most important for the poorest and 2) those who were not successful investors and want a scapegoat to blame: "if it weren't for that SS tax, I'd be rich!".

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  7. The $61 trillion would be the present value of the liability: the amount that you would have to have today, invested, in order to meet future obligations. The amount actually spent would be larger as future payments are discounted in the present value. David Walker, the Comptroller General of the United States, estimated the present value at slightly more than $50 trillion in 2006. (http://www.gao.gov/cghome/d07739cg.pdf) Richard Fisher, the President & CEO of the Dallas branch of the Federal Reserve Bank, put the figure at more than $85 trillion in 2008. (http://www.dallasfed.org/news/speeches/fisher/2008/fs080528.cfm)

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  8. Anonymous, you said that "this type of scare tactic is made by ... those too stingy to put their contribution in the pot for the benefit of all ..."

    It is good for you to give your money, if you so choose, to help those less fortunate than yourself, but it is evil for you to take money by force from someone else, whether you keep the stolen money or give it away.

    Social Security does not benefit all; it benefits some at the expense of others.

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  9. Why is this dept always by how much per household? I did not create this dept. I did not use this dept. I had nothing to do with said dept. I will not help payoff this dept, it ain't mine. I see a need for a full collapse of this system, the sooner the better. Then we can get around to rebuilding this country and do it free of the parasites that have ruined it. The final act of any government is to loot the people.

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  10. Good point there anonymous @ 10:28 Lets get it started, done and over with so it will be every man for himself and the greedy bastards in power that have been lining their pockets thru all this, they will be the first to get taken out by the mobs in the streets because the greedy bastards won't know the first thing about survival and all that money in their pockets won't buy jack when "We the people" go looking for them.

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  11. Social security benefits all who pay into it long enough to collect benefits.

    It is a very successful, pay as you go plan that has kept tens of millions of old folks from being totally destitute, including some who invested with Mr. Madoff, Mr. Dotcom, Mr. Enron, etc, etc, etc, etc,etc. It would be better if everyone could save on their own, have all their investments pay well, etc but that isn't reality. That's why SS exists and that's why it isn't going away, no matter how much Mr. Wenzel squeals about it like a sow giving birth to a litter of broken bottles.

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  12. comment from the old world ie the Netherlands
    We were laughed at about our social security
    But we have sustainable debts, reasonable and funded pensions, a decent healthcare for all,
    less crime and no weapons for all and yes a tax burden of 38% of income. But no desparate mobs, extreme violance and 3th or 4th generation of ghetto inhabitants.
    So who is better of do you think.
    I used to admire America and still thankfull for what you did to free us. But youre emphasis on money and consumption and every men/woman for him/herself got you in the mess described in the article. As long as you don't establish a society with compassion with the less fortunte
    you will implode as a nation
    hate to say it

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  13. Everyone benefits from SS, but the poor benefit most. They could not, under any scenario, provide for themselves during old age, so SS allows them to not be destitute - they'll still be poor, but that's OK - SS is not meant to make you rich - and it is not meant to be your only means of support in old age. Unfortunately for a large chunk of the population SS is their only means of support in old age.

    Bill Gates, if he worked 40 quarters and paid into SS, could collect. Thus, he benefits, even though he doesn't need it.

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  14. grab the rug, ethyl---my printing press has not been greased for a long time. send Ben B. and timmy with grease guns---they will probably not know how to replace the empty cartridge. ponzi
    is a midget compared to the current clowns.

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  15. Perhaps this is reason for the massive roll out of the airport x-ray machines, and mobile x-ray vans being deployed, fewer people will live to collect SS.

    http://www.rockyflatsgear.com/articles/articles-english/mandatory-xxx-ray-airport-scans-have-arrived.html

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  16. Our big entitlement problem is due 100% to medicare, not SS. The problem is that we can now keep people alive FAR beyond what is reasonable or desireable. BUT the right-wing religious zealots will not allow doctor-assisted suicide so people cannot humanely end their lives which MANY would do if a humane way was available to them.

    The above paragraph describes the ENTIRE problem with entitlements in the USA. The right-wing religious zealots will force the USA into bankruptcy, and THAT will result in 10s of millions of deaths in the collapse.

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  17. Anonymous at June 9, 2011 7:22 AM is type 1:

    "... those too stingy to put their contribution in the pot for the benefit of all, but most important for the poorest..."

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  18. "The above paragraph describes the ENTIRE problem with entitlements in the USA. The right-wing religious zealots will force the USA into bankruptcy, and THAT will result in 10s of millions of deaths in the collapse. "

    You have a point but it does not mean SS is under any circumstances either a superior alternative to private means of provision for old age (it demonstrably isn't) or that it can be funded. SS contributes to the US's very high unfunded liabilities at such astronomical heights that it doesn't matter what proportion exactly it consumes.

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  19. "Social security benefits all who pay into it long enough to collect benefits."

    OK, so what of those who won't and will have to pay for it? Moreover, prove that it benefits them more than comparable private investment schemes would (hint: you can't.)


    "It is a very successful,"

    Scam.

    " pay as you go plan that has kept tens of millions of old folks from being totally destitute,"

    Purely looking at the "seen". What of its costs? What of alternatives to SS for these "elderly"?

    " have all their investments pay well, etc but that isn't reality."

    Nor is thinking that a multi, multi-trillion scheme is going to ever have enough finance to keep it going. I mean if you divided that by 10 it'd be a huge amount still.

    "That's why SS exists"

    No, it exists to keep the populace coddled and dependent on government for its existence.

    " and that's why it isn't going away,"

    But it will.

    " no matter how much Mr. Wenzel squeals about it like a sow giving birth to a litter of broken bottles. Everyone benefits from SS, but the poor benefit most."

    Utter bullshit.

    " They could not, under any scenario, provide for themselves during old age,"

    Why? Vague assertion. Prove it. What SS will very successfully do is impoverish future generations of the young who have to foot its immense bill and see none of its "benefits".

    " so SS allows them to not be destitute - they'll still be poor, but that's OK - SS is not meant to make you rich - and it is not meant to be your only means of support in old age. Unfortunately for a large chunk of the population SS is their only means of support in old age."

    Well go figure - the government says it'll take care of your future for you. What need is there, then, to make your own plans? Please let's not paint these people as helpless idiots. If they're intelligent enough to elect someone to agitate on their behalf, they're intelligent enough to hire someone to watch their money for them and grow it. And there's many people better suited at that than government.

    "Bill Gates, if he worked 40 quarters and paid into SS, could collect. Thus, he benefits, even though he doesn't need it. "

    How does he "benefit"? Prove that the money couldn't have gone into more profitable alternative lines of investment.

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