• Lisa Simpson
• Jul 30,2010
• In: Foreclosure

The Debt is More than What Appears in Accounts Books

The debt of the Federal Government is far more than what appears in the account books. For instance although Fannie Mae and Freddie Mac have been taken over by the government, its huge losses on the mortgage backed securities have not been taken into account. This is just one instance of oversight.

It has made many legislatures argue that the hidden debts should be assessed before things start to boil. Marvin Pahup an expert on federal budgets recently wrote, “Their costs are largely unmeasured, unrecognized in the budget and unmanaged. A troubling aspect of current policy aimed at restarting the financial markets is the likely expansion of implied guarantees to include the obligations of additional private financial institutions”.

The government owes huge amount to the trust funds of Social Security and Medicare. This decade the making of payments have begun. But considering the fall in revenue it will not be easy to continue with it. Professor Len Burman of Syracuse University is an expert on taxes, public administration together with economics. He feels the legislators should now come face to face with the reality that “they have no way of funding them right now”.

But the debts that are not included in the present budget coverage will have to be paid after the payment to the trust funds comes to a close. This will occur for Social Security in 2037 and for Medicare within the next ten years.

At this juncture the plan would be collecting just enough taxes to pay a part of the benefits that have been promised. This would put a staggering pressure on Washington to catch up with the gap and to do so Uncle Sam would have to borrow money again.

Stuart Butler of Heritage Foundation said considering the circumstances these obligations of the government to Medicare and Social Security should be covered in the budget picture. Currently the money set aside for both these entitlement schemes comes under the head of ‘mandatory’ spending. The spending increases are under autopilot and the financial promises are uncapped in later years.

Who does not like tax holidays? Over a trillion dollars come under this coverage. That is the amount that the Treasury has waived aside as a result of many incentives. And this in the ultimate run will cause the government to make more loans. But this over a trillion dollars is not counted in the budge layout – but it is there alright.

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