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Truth in accounting

Updated: May 3, 2013 12:14PM



If you're planning for retirement, you have more to worry about than your investments. You really should be concerned about what this country will look like in 20 or 30 years, when you're trying to live on a fixed income or a limited pool of assets.

The financial state of the union is a mess. That's not a surprise. It's in the headlines -- from the mortgage crisis to the wild gyrations of the stock market. Surely the president's State of the Union speech tonight will touch on all of those financial issues.

But will the president tell the truth, the whole truth, about the numbers and the extent of our nation's financial woes over the long run? Will he acknowledge the true cost of the emergency aid package now being debated in Congress?

Pressing the issue

The Institute for Truth in Accounting is determined that the real numbers will not only be spoken and written, but considered by all the candidates running for office this year.This non-profit and non-partisan Institute has created a Web site, www.Truthin2008.org, to bring the financial facts to the forefront.

Prominently displayed on the home page of this Web site are two running series of numbers that increase almost faster than the eye can capture. The first is the "official" national debt, calculated by the U.S. Treasury, which was $9,193,222,137,000.00 at the instant when I checked in. The number is growing by $1 million every minute!

Beneath it is another number, also clicking higher by the second. This, according to the Institute is the true national debt figure: $55,146,513,890,000.00.

This calculation of the national debt includes all the "off balance sheet" liabilities of the government -- its promises to pay benefits to Social Security and Medicare recipients as well as government workers' pensions.

In other words, the true liability of the United States of America is not only the Treasury bills, notes and bonds we sell to finance our annual deficit and past deficits. To get to the true liability, you must include all the promises we've made to make payments in the future.

That's how you get a $55 trillion national debt,

These are MEGO numbers: My Eyes Glaze Over. The numbers are staggering.

But no one talks about those "off balance sheet" obligations. It's as if you only looked at your checkbook balance to figure out your family finances -- and ignored the amount due on your mortgage and your credit cards. That would totally misrepresent the state of your finances.

Do you think you could get a loan if you only presented your checking account statements? Surely your banker would demand the complete picture. And that's just what's happening around the world, as central banks have been recognizing that the United States is on a collision course with debt. Foreign central banks have been dumping their dollars and buying gold, other currencies and commodities.

Of course, those foreign central banks still have huge holdings of U.S. Treasury securities. The United States remains the most stable country on the planet, and the safest place to hold assets during a crisis. But Treasury securities are becoming less enticing, as the Fed pushes rates down to stimulate the economy.

Even worse, all of the political candidates are rushing to give the American public their solutions to an economic slowdown. Most involve sending a check from the government, a rebate on the tax dollars that have been deducted from our paychecks all year long. In the long run, those checks will only increase the deficits, and thus increase our borrowing demand - eventually pushing rates higher.

Ask the tough questions

The American people need to ask their president, and their presidential candidates, how they'll deal with this tough issue of our growing debt burden. Will we tax our children? Will we "print" and thus inflate the burden away? Will we break our promises to retirees? Or will we start dealing with this issue in the coming election?

Truth in Accounting Institute founder Sheila Weinberg said: "It isn't pretty. But we have to face the truth -- or we could face disaster." That's definitely The Savage Truth.

Terry Savage is a registered investment adviser. Distributed by Creators Syndicate.



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