Thursday, January 03, 2008

Fiscal Year 2007 Financial Report of the United States Government

"We might hope to see the finances of the Union as clear and intelligible as a merchant's books, so that every member of Congress and every man of any mind in the Union should be able to comprehend them, to investigate abuses, and consequently to control them"
- President Thomas Jefferson to Treasury Secretary Albert Gallatin, 1802.

Let's see how the government did...

I started reading the 'Citizen's Guide' of the "Fiscal Year 2007 Financial Report of the United States Government". The Citizen's Guide is a summary and is 10 pages out of 186 pages for the report. We have been receiving more taxes, but increasing the budget at a slower pace. The net operating costs are -275.5 billion. The government is on the hook for 9.205 trillion, split fairly evenly between debt held by the public and federal employee and veteran benefits. The big problem looming comes up next in the first table, it is expected that the US will have to pay out between 40.9-45.0 trillion dollars in social security over the next 75 years.

On page 9 there is a chart titled "Current Trends are not Sustainable". I suspect someone has a college degree! If we pull in roughly what we have been pulling in (Total Revenues), about 20% of the GDP, then by 2050 the chart says we should be bringing in 35%. Even if we pay off the national debt, we would by 2050 need to be bringing in 25% of the GDP. I am not too sure on their model though, it looks sort of simple.

On page 11 they show an interesting chart with the % of GDP that is debt. It looks like 50% is about where it has been at. The model shows an exponential increase starting relatively soon.

I like Chart E on page 14, It shows that DoD ~= Social Security ~= Department of Health and Human Services ~= Everything else but debt. Social programs account for twice as much as the DoD. Each person in the United States owes about 17,000 dollars. About half of this is in foreign countries, so they are receiving our interest payments. Good news, as a percentage of GDP the debt has fallen from 50% in 1993 to 36.9% in 2007.

Farther into the report, page 122, they estimate that the cross over year for Social Security will be in 2017. In 2041 the trust fund for social security is estimated to be spent. Medicare is a bit worse off. The cross over occurred sometime in 2005 or 2006. The trust fund is only projected to last until 2019.

There are a lot of things that the politicians need to be talking about this 2008 election year. One that you won't hear too much about will be budget related issues. The issues are coming, and we need to start dealing with them. The government is bailing out the financial industry from stupid loans, but who will bail out the government?

Overall the report was fairly easy to understand, but the implications of the data are harder to decipher. The GAO is still not satisfied with the agencies and their accounting processes.

To even begin to solve this problem we need to get the budget finalized before the financial year starts. We elect and pay congress to figure things out. They are supposed to disagree, and then find a way to agree. We need to hold congress (and the President) accountable for not figuring out the budget. I don't see how congress needs to be involved in a baseball doping scandal when it should be managing the government. I would love to see a law mandating that a budget is passed before the financial year starts, with something absurd like jail time for congress if they can't get it done.

*All numbers are in current 2007 dollars.

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