You could feel whiplash this summer as, on July 25, the media reported that the nation’s second quarter GDP expanded at a “healthy” rate of 2.8%. This was followed on Aug. 5 with the S&P index nose-diving 3%, attributed by observers to a spike in unemployment and fears of a recession. It was the usual parade of shiny objects — explanations for events that change seemingly with the wind or the politics of the observer — while the objective, well-defined threat to the economy remains hidden in plain sight. Sleepy Hollow, New York resident Michael Doorley, a certified public accountant and former chief financial officer, has been on a crusade to educate the media and the public as to the dire financial condition of our nation because of uncontrolled debt. He educates civic groups and the media about a document few have even heard of, the Financial Report of the United States Government, prepared annually by the Treasury Department, in coordination with the White House Office of Management and Budget. The Financial Report of the United States Government Instead of economists, who seem unable to agree on much, the Financial Report is prepared by accountants, adhering to financial reporting standards called Generally Accepted Accounting Principles. Since the 1990s, it has allowed Americans to see the financial position and condition of the federal government, just like a publicly traded corporation — complete with a balance sheet and adapted income statement for government. It’s not pretty. This month, the gross national debt entered uncharted territory as it reached $35 trillion — $104,000 for every American man, woman and child. The term “not sustainable” or “unsustainable” appears more than 20 times in the 2023 Report, principally in relation to the increase in our debt held by the public relative to GDP. This represents all of the debt held by Americans and foreigners, including the Federal Reserve. For context, the highest ratio of debt-to-GDP in history occurred just after World War II at 106%. “The debt-to-GDP ratio was approximately 97% at the end of FY 2023,” the report states. “Under current policy and based on this report’s assumptions, it is projected to reach 531% by 2098. The projected continuous rise of the debt-to-GDP ratio indicates that current policy is unsustainable.”Equally bad is the state of Medicare and Social Security, with Social Security projected to become insolvent in 2035:“The Statement of Social Insurance (SOSI) shows that the PV [Present Value] of the government’s expenditures for Social Security and Medicare Parts A, B and D, and other social insurance programs over 75 years is projected to exceed social insurance revenues by about $78.4 trillion, a $2.5 trillion increase over 2022 social insurance projections,” -the report states.The snapshot from the Financial report’s executive summary shown below lists the budget deficit for 2023 at about $1.7 trillion on a cash basis, but the Net Operating Cost, the accrual basis “bottom line” is double that number. The net position on the U.S. Government balance sheet — its total assets and total liabilities — is negative $37.5 trillion. Need for large tax Increases and/or spending caps to reduce the debt The consequences of allowing the deficit to grow are well chronicled in the histories of Germany prior to World War II, Argentina and Zimbabwe, with rampant inflation, unemployment and social unrest. And yet Congress and the Biden administration have allowed the debt to increase by $1.9 trillion since the start of this fiscal year, neither hiking taxes nor reducing spending, as recommended in the report to avoid a crisis: “To illustrate the magnitude of policy changes needed, if policymakers choose to close the fiscal gap solely through increased revenues, they would need to make policy changes over a 75-year period (fiscal years 2024 to 2098) that increase each year’s projected revenues by 23.8%. If policymakers choose to close the fiscal gap solely through reductions in noninterest spending, they would need to make policy changes over a 75-year period (fiscal years 2024 to 2098) that reduce each year’s projected noninterest spending by 19.8%. The projections show that the longer policy changes are delayed, the more significant the magnitude of policy changes will need to be to achieve the debt-to-GDP target.” Republican and Democratic administrations since 2000 have become comfortable ratcheting up the debt with popular unfunded tax cuts, such as former President Donald Trump’s tax cut, which added $2 trillion to the national debt, or massive spending bills. The non-partisan Committee for a Responsible Federal Budget has a comparison of the two presidents. President Joe Biden was so comfortable with increasing the national debt that he tried by executive order to forgive a large share of student loans, the largest asset on the nation’s balance sheet. Only the U.S. Supreme Court stopped him from a decision that would have increased the federal budget deficit by 27%, according to the Congressional Budget Office. His latest proposal for student loan forgiveness is currently forecast to add between $870 billion and $1.4 trillion to the debt. More from The Roberts Report:The issue is not Joe Biden’s age. Can we trust his cognitive capacity?Treasury Secretary Yellen ignores the debt Previous treasury secretaries in their introductory messages to the Financial Report have at least paid lip service to the need to address the “unsustainable” levels of national debt. For example, in 2010, Obama Treasury Secretary Tim Geitner said, “But as we combat unemployment, we must also address the challenge of bringing future debt down to sustainable levels…. we need to make difficult choices to reduce deficits and the national debt.” Yet Biden Treasury Secretary Janet Yellen did not even mention the debt in her 2023 introductory message to the Financial Report. To be fair, some of the nation’s most respected economists and business leaders have been making dire predictions for quite a while now. The best-selling author of “The Black Swan,” Nassim Taleb, who predicted the 2008 financial crisis, said in January the economy is in a “debt spiral,” which could become a “death spiral.” Fed Chairman Jerome Powell told CBS News’ 60 Minutes, “It’s probably time, or past time, to get back to an adult conversation among elected officials about getting the federal government back on a sustainable fiscal path.” Morgan Stanley CEO Jamie Dimon called the U.S. debt, the “most predictable crisis in US history,” Unfortunately, the people in power don’t seem to be listening. Comptroller General David Walker speaks out Former Comptroller General David Walker, who served for ten years during the Clinton and Bush presidencies, has watched our exploding debt with alarm.In a wide-ranging interview, he told me, “Today, the fastest growing expense in the federal budget is interest … We’re spending more on interest than Defense or Medicare, and based upon current projections, it will be our largest line item in the next couple of decades if we don’t end up changing course.“As has been said by others,” continued Walker, ‘How do you go bankrupt? First, slowly, and then suddenly.’ And that’s the situation here.”Alexander Roberts is a longtime contributor to lohud.com, The Journal News and the USA TODAY Network. This column is part of a regular, monthly series of columns titled The Roberts Report.
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