The U.S. Government Is Already Bankrupt
Jerome R. Corsi
True U.S. Federal Deficit in 2018 Reached Three Times U.S. GDP–
True National Debt Hits an Unsustainable $75.3 Trillion in 2018
Future Social Security and Medicare benefits required to be paid by current laws have already bankrupted the United States government estimates economist John Williams, the author of the Internet website shadowstats.com that aims to provide an honest economic estimate of today’s politically correct understating of federal budget deficits and the true estimate of the federal government’s negative net worth.
Most Americans are unaware that the true GAAP-accounted negative net worth of the federal government reached $75.3 trillion in the most recently published Fiscal Year 2018 data, a number that was more than three times $20.6 trillion, the 2018 GDP (current dollar gross domestic product) of the United States, just under by approximately $10 trillion, the total estimated gross domestic product for the world estimated at $84.8 trillion.
“As government obligations continue to spiral out of control and the U.S. government shows no willingness to make the magnitude of spending cuts required to return to fiscal responsible, the U.S. economy is headed to a great collapse coming in the form of a hyper-inflationary great depression,” says Williams, “Uncontrolled federal spending has reached a clearly unsustainable level.
The officially estimated GAAP federal budget deficit in FY 2018 was $5.959 trillion, versus the official deficit of $0.779 trillion or 7.65 times.
The difference between the $0.779 trillion “official” 2018 federal budget deficit numbers and the $5.959 trillion budget deficit based on data reported in the 2010 Financial Report of the United States Government is that the official budget deficit is calculated on a cash basis, where all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur.
Williams’s calculations are based on the Financial Report of the United States Government, a publication released by the U.S. Treasury once every year. The calculations in this Treasury publication are on a GAAP basis (“Generally Accepted Accounting Practices”) that includes year-for-year changes in the net present value of unfunded liabilities in social insurance programs such as Social Security and Medicare.
Under cash accounting, the government makes no provision for future Social Security and Medicare benefits in the year in which those benefits accrue. Under GAAP accounting, all future obligations of the federal government are included in the calculations, including the large and growing obligations required as future nondiscretionary government spending mandated to future beneficiaries by Social Security and Medicare benefits already on the books as existing laws.
“The broad GAAP-based federal deficits, including the Social Security and Medicare unfunded liabilities, have been in the $4 trillion to $5 trillion range since 2008-2019, remaining today both uncontrollable and unsustainable,” Williams wrote.
Given that Congress finds extending Social Security and Medicare benefits easier than cutting them, the GAAP calculations of the U.S. government’s negative net worth continues to increase.
The most recently published hard numbers from the U.S. Treasury show a rounded, headline GAAP-based negative U.S. government net worth of $75.3 trillion in fiscal-year 2018 (ended September 30), versus $69.4 trillion in 2017 (difference is the GAAP-based deficit). That is against redefined (benchmarked) nominal U.S. GDP of $19.5 trillion in 2017, $20.6 trillion in 2018, with the GDP series available on consistent basis going back in time.
Williams argues the total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, have effectively placed the U.S. government in bankruptcy, even before we take into consideration any future and continuing social welfare obligations that may be embedded within the Obama administration’s planned massive overhaul of health care.
“The government cannot raise taxes high enough to bring the budget into balance. You could tax 100 percent of everyone’s income and 100 percent of corporate profits and the U.S. government would still be showing a federal budget deficit on a GAAP accounting basis.”
Williams argues the U.S. government has condemned the U.S. dollar to “a hyperinflationary grave” by taking on debt obligations that will never be covered by raising taxes and/or by severely slashing government spending that has become politically untouchable.
“Bankrupt sovereign states most commonly use the currency printing press as a solution to lacking sufficient money to cover obligations,” he cautioned. “The U.S. government and the Federal Reserve have committed the system to its ultimate insolvency, through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, gross mismanagement, and a deliberate and ongoing effort to debase the U.S. currency.”
“For those living in the United States, long-range strategies should look to assure safety and survival, which from a financial standpoint means preserving wealth and assets,” he advises.
Williams suggests that precious metals – including physical gold in the form of sovereign coins priced near bullion prices, as well as holdings in silver and platinum — remain the primary hedge in terms of preserving the purchasing power of the dollar.