Steven M. Collins
June 3, 2007
A June 2, 2007 article at USATODAY.com revealed that the size of the US Federal Government’s debt is far larger than previously realized. The article entitled Rules ‘Hiding’ Trillions in Debt stated that the real size of the US Federal Government debt last year was actually $1.3 trillion, over five times greater than the officially reported level of $248 billion. This sleight of hand is made possible because the US federal government does not use the accounting system which is required of state and local governments as well as corporations. The federal government has “hidden” from voters the real extent of its annual profligacy as its accounting “rules” allow it to hide much of the deficits in the Social Security and Medicare budgets. Keep in mind that the article reveals that the federal government ran a deficit of $1.3 trillion during the most recent, single year!
What does this mean to you? The USA TODAY article states that “taxpayers are now on the hook for a record $59.1 trillion in liabilities…That amount is equal to $516, 348 for every U.S. household. By comparison, U.S. households owe an average of $112,043 for mortgages, car loans, credit cards and all other debt combined.” Congratulations! If you are an average U.S. household, you have a debt burden of $628,391 thanks mostly to the over-spending federal government. Given the fact that the White House and Congress have thrown all vestige of financial common sense to the winds for years, it is likely that the situation will get steadily worse.
The article adds that “The Financial Accounting Standards Advisory Board, which sets federal accounting standards, is considering requiring the government to adopt accounting rules similar to those for corporations… [but]…The White House and the Congressional Budget Office oppose the change…” Given the federal budgetary deceit that has been going on for many years (how else do you think the federal deficit got to $59.1 trillion!), no wonder the White House and Congress oppose any requirement that they should have to report honest numbers to the voters!
How will this gargantuan federal deficit ever be repaid? The simple answer is…that it will never be paid off. At least not in terms of paying it off with dollars of equivalent purchasing power. Either it will be “taken care of” via an outright default or the loans will be “paid” back to lenders via greatly inflated dollars with lessened value.
Speaking of inflation, did you see the latest government inflation statistics? In spite of huge price increases at the gas pump and for many food items, the government’s “core inflation rate” reported that there was scarcely any inflation at all! Doesn’t that make you feel better? I think many millions of Americans now realize that the federal government’s inflation data is as phony as the USA Today’s article revealed the federal budget deficit data to be. Many media articles have documented that the CPI is no longer calculated in a manner consistent with previous decades. The many “hedonic” and “subjective” adjustments made to the way the CPI is now calculated allow for the “official” rate of inflation to be consistently lower than the rate of inflation experienced by consumers in the real world. The “core inflation rate” excludes the inflation in the food and energy sector. Of course, no one on the planet, even the bureaucrats calculating the phony CPI rates, can live without eating food and consuming energy so the “core inflation rate” is meaningless. No one experiences inflation at the “core inflation rate” because that rate is an artificial statistical construct which cannot be experienced by anyone in the real world! However, the phony CPI is still the “official” rate of inflation so everyone’s cost-of-living increases are limited to the “official” rate of inflation instead of the real rate of inflation. That is why everyone’s budgets are being pinched harder every year. If the government reported an honest CPI, its annual budget deficits would be higher than $1.3 trillion because all federal retirees and Social Security recipients would have even larger paychecks to fund. If you wish to know what the real rate of inflation is in the USA, as calculated in a manner consistent with the methodology of previous decades, you may see it at www.shadowstats.com.
The current situation of the USA is sad, indeed. The once great USA has sunk so low that it needs to “cook the books” to hide most of its deficit and it even creates deceptive inflation statistics to keep its own citizens from knowing the truth.
The Bible has some apt commentary on what is happening to the USA’s finances. When the ancient Israelites were entering the Promised Land, God told them that a number of immutable things would happen to them based on whether their nation made righteous or sinful decisions. Deuteronomy 28:12 stated to the Israelites that if they obeyed God’s immutable laws: “You shall lend to many nations and you shall not borrow.” This was the condition of the USA not that many years ago when the USA was the largest creditor nation in the world and other nations borrowed from the prosperous USA. Deuteronomy 28:44 warned the Israelites that if they disobeyed God’s immutable laws, others “shall lend to you and you shall not lend to them.” That has come to pass. As America has increasingly forgotten God and ignored his immutable laws, our people and governments have abandoned sensible financial laws in a greedy pursuit of “we want it all now.” Proverbs 22:7 states an immutable financial law that no human government can ever overturn: “the borrower is servant to the lender.” As the USA becomes an ever-larger “borrower” of money from foreign nations, it increasingly becomes a “servant” to those nations. The more money the USA borrows from China and other nations, the more leverage those nations will gain over US governmental policies and decisions. Given some of the strange actions and words coming out of Washington, DC lately, that may already be happening. For more information on how the strained financial system of the Western world has its origins in the lending systems of ancient Babylon, the reader is invited to read my related article (“A Captivity to Babylon the Great?”) available at the “Articles” link at this website.
Steven M. Collins