Dave Gonigam

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Financial Report of the United States

“A column in the May 1, 2006, Financial Times by Jim Cooper starts this way: ‘The federal government [of the U.S.] keeps two sets of books, but the Bush administration only wants you to see one of them There is the highly publicized ‘President’s Budget’ issued by the Office of Management and Budget, and the almost-secret ‘Financial Report of the United States,’ issued by the Department of the Treasury. The budget says that the 2005 US fiscal deficit was $319 billion, but the Financial Report claims it was $760 billion.’

“To make a long story short, the phony deficit is a result of the cash report, meaning that this report only included dollars going out and dollars coming in. But the correct way to do it is via modern accrual accounting. According to the Treasury report, the U.S. obligated itself to spend $760 billion more than it collected from taxpayers in 2005, so the “net operating cost” and the true deficit was $760 billion.”

– Brian Myers

You can also find the report mentioned above at: Treasury Report of the United States

Chart C shows the government’s total revenue (its net operating cost, including the amount attributable to actuarial costs), and its resulting net operating revenue (cost) for the past seven years. In fiscal years 1999 and 2000, the government’s total revenue exceeded its net cost and resulted in net operating revenue of $101.3 billion and $39.6 billion for these years, respectively. However, in fiscal years 2001 through 2005, the government’s net cost exceeded its revenue and resulted in net operating costs of $514.8 billion, $364.9 billion, $667.6 billion, $615.6 billion, and $760.0 billion, respectively.

Incidentally, the 30-year bond puts I recommended in last month’s newsletter are now up 42%. Everyone says bonds are falling because the Fed fears inflation and rates are headed higher. You’d never know that this huge borrowing requirement (in a world where all interest rates are rising…i.e. Australia) played a part. It’s getting mighty tough to pay the bills in America…

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