Smith Faculty Opinion Article
The 30 Seconds Outlook
February 1, 2010
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“The mountain of debt that Obama is piling up is
breathtaking and . . . it will put unprecedented burdens on the economy
that will only get worse under his proposed tax and spending policies.”
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— Arthur Laffer, economist
and Reagan advisor,
in Donald Lambro, HumanEvents.com. January 27, 2010. |
The State of the Union speech provided no acknowledgement of or intention to
deal in any necessary way with the most critical problem facing the U.S. — the
deficit now and in the future!
To provide perspective on this problem, a look at the nation’s 2007
accounting balance sheet (billions) is essential:
Total Revenue $ 2,627.3
Total Expenses 3,157.3
Net Operating (Loss) ($ 275.5) — 2007
Total Assets $ 1,581.7
Liabilities—Public Debt $ 5,077.5
Employee Benefits 4,769.1
Other Liabilities 940.1
Total Liabilities $10,786.9
Net Worth (Loss) ($9,205.8) — $9.2 trillion
Net worth (Loss) represents the nation’s financial accounting value from
long-term operations, and does not include balance sheet deficits beyond 2007.
The balance sheet ignores Social Security and Medicare/Medicaid obligations
to current and beyond 2007 participants of $86.0 trillion. These obligations
represent 40% of the 2007 annual operating budget.
Further, the government does not include the losses past and future from
Freddie Mac and Fannie Mae operations in the nation’s balance sheet. These
government-sponsored housing-subsidy agencies are in conservatorship and their
losses should be accounted for. Through 2009, losses were $291 billion, with an
additional $21 billion so far in 2010. Losses in the next 10 years are estimated
at $389 billion.
Total Freddie Mac and Fannie Mae losses through 2009 and estimated future
(only 10 years) are therefore $680 billion.
So let’s add the figures: $9.2 trillion plus $86 trillion plus $680 billion
equals $95.9 trillion.
The Administration states that in fiscal 2011 it will hold the line on the
35% of the budget that is discretionary. Operating budgets have already been
increased by 24%. And then there are the costs of Obamacare and Cap and Trade,
and a tax and spending agenda that does not generate economic growth.
John A. Haslem
