USA Today: Real Deficit is $5 Trillion

A USA TODAY study finds that the typical American household would have had to have paid nearly all of its income in taxes last year to balance the budget if the government used standard accounting rules to compute the deficit.

Under those accounting practices, the government ran up debt equal to $42,054 per household last year, which is almost four times the official number reported.

A U.S. household’s median income is $49,445.

Unlike standard accounting, Congress exempts itself from including the cost of promised retirement benefits when figuring out the budget. Companies, state and local governments must include retirement commitments in financial statements, as required by federal law and private boards that set accounting rules.

The deficit was $5 trillion last year under those rules instead of the official number of $1.3 trillion. Liabilities for Social Security, Medicare and other retirement programs rose by $3.7 trillion in 2011, according to government actuaries, but the amount was left off of the government’s books.

According to USA TODAY’s calculation federal finances under these accounting rules since 2004 found no correlation between fluctuations in the deficit and which party ran Congress or the White House.

Key findings:

•Social Security had the biggest financial slide. The federal government would need $22.2 trillion, set aside and earning interest, to cover benefits promised to current workers and retirees beyond what taxes will cover. That’s $9.5 trillion more than was needed in 2004.

•Deficits from 2004 to 2011 would be six times the official total of $5.6 trillion reported.

•Federal debt and retiree commitments equal $561,254 per household. By contrast, an average household owes a combined $116,057 for mortgages, car loans and other debts.

“By law, the federal government can’t tell the truth,” says accountant Sheila Weinberg of the Chicago-based Institute for Truth in Accounting.

Jim Horney, a former Senate budget staff expert now at the liberal Center on Budget and Policy Priorities, says retirement programs should not count as part of the deficit because, unlike a business, Congress can change what it owes by cutting benefits or lifting taxes.

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