The Biggest Ponzi Scheme on the Planet-The U.S. Government
"American Economic Exceptionalism Explained"                     USAPonzi                                      by John W. White   Mar 29, 2013

Living Beyond our Means
Sep 2013

The unfunded liabilities created by USAPonzi are a result of the Government not collecting enough tax revenue each year to adequately fund the totally unaffordable social benefit commitments that Congress has approved.   Since the U.S. citizenry is not being taxed enough to fund either our cash-based budget or the accured expense for our future social benefits, the typical citizen is spending a lot more "should be" tax dollars than is financially prudent.  Therefore we as a country, by spending more than our income AND not saving for our retirement and future healthcare expenses, have been living beyond our means since 1968.  Unfortunately many individuals have also not been saving in their personal accounts for their retirement, in many instances because they are counting on Social Security and Medicare, and as a result these folks will suffer a "double whammy" when USAPonzi implodes.  The Government will not have the money for their Social Security and Medicare as promised and they will not have a retirement nest egg.

This U.S. Government Financial Data (1969-2012) table shows how our Federal Debt and our Federal Obligation (Federal Debt + present value of Unfunded Liabilities) have increased over the period from fiscal year 1969 thru fiscal year 2012 which ended on September 30, 2012.   I have not been able to find any data for our GAAP-basis Deficit or our Federal Obligation prior to fiscal year 2000.   It is my understanding that the Government did not even prepare a GAAP-basis financial statement prior to 2000.

This report (U.S. Government Financial Data (1969-2012)) has excluded the data for the third quarter of 1976 when the fiscal year end changed from July 31 to September 30.

Living beyond our means: Because of incurring more debt ($15.7 Trillion)

We have, for the last 45 years, been running a "Government reported" Cash-based Deficit except for the year (1969) that LBJ introduced the Unified Budget and during the Internet Bubble (fiscal years 1998-2001) when we had a tax revenue windfall.   More importantly, our Federal Debt has increased every year since 1969 because the way the Federal Government calculates our deficit does not follow proper accrual accounting rules even for Cash-based accounting.  Over the 4 fiscal years (2009-2012) the "Government reported" Cash-based Deficit was more than a Trillion dollars each year and since 1969 we have accumulated a total of $10.1 Trillion of "Government reported" Cash-based Deficit BUT we have accumulated $15.7 Trillion more Federal Debt.  So even though we should be using GAAP-basis accounting instead of Cash-based accounting, which understates our "real" deficit by about $4 Trillion per year, our Government's Cash-based reporting is also inaccurate and understates how much Federal Debt we are really accumulating each year.  This overspending and undertaxing has allowed us, as a country, to live beyond our means.

Living beyond our means: Because of not funding our future entitlement commitments ($60-70 Trillion)

While borrowing money ($15.7 Trillion) has given us, as a country, a significant supplement to our disposable personal incomes, the really major problem is not funding our future entitlement commitments.  This has created unfunded liabilities on the order of $60-70 Trillion and as a result has artificially allowed us to live dramatically beyond our means while adding, according to, a total of $85 Trillion to our Federal Obligation (Federal Debt plus present value of unfunded liabilities) since fiscal year 1969.   We are currently incurring a GAAP-basis Deficit of $5-6 Trillion a year that allows us to pretend that we are much, much more prosperous than we really are. 
This overcommitting, overspending and undertaxing has allowed us, as a country, to live dramatically beyond our means.

Living beyond our means: Supplemental Income per Citizen

Table 1
below shows what I am calling "Supplemental Income" per citizen.   Because we have been running a massive GAAP-basis Deficit since the Unified Budget was established, this undertaxing, relative to our spending desire, has made available significant extra "spendable " dollars to the average citizen of the United States.   If we just look at the last 5 years (fiscal years 2008-2012 in Table 1 below) we have averaged $16,000 per citizen per year of Supplemental Income, (see calculation below) where Supplemental Income is determined by dividing the GAAP-basis Deficit by the number of U.S. citizens.

      2012      $21,019
      2011        14,423
      2010        13,916
      2009        14,007
      2008        16,776

     Total        $80,141 /5 years  = $16,028

According to the U.S. Bureau of Economic Analysis, Personal Income per capita was $42,693 in 2012 (place your cursor on the year of interest to get a digital readout) and Disposable Personal Income per capita (personal income minus federal, state, and local taxes) was $38,000.   If the Federal Government was taxing enough to balance the GAAP-basis budget (i.e. by the amount of the average Supplemental Income over the last five years ($16,000)) then disposable income per citizen would be reduced to $22,000 ($38,000-$16,000=$22,000).   Since consumer spending is approximately 70% of GDP, then one might infer that GDP would drop a similar amount; about 42% ($16,000/$38,000=0.42).   This 42% reduction in GDP is somewhat more than the 33% my U.S. "Real" GDP" analysis suggests BUT is lower than the 46% reduction in GDP that occurred in the first four years of "The Great Depression".   Balancing the GAAP-basis budget with this dramatic increase in taxes would be sufficient to suspend the increase in our Total Federal Obligation and might produce a reduction in our Gross Federal Debt but it would lead to the deep depression that My Conclusions predicts.  By the way, this level of taxation would be a 48.5% flat tax on all taxpayers           (($42,693-$22,000)/$42,693=0.485)!!  Ouch!!!

But let me be clear, increasing our tax rate to 48.5% for all taxpayers does not even come close to solving our problem.   It would only balance the GAAP-basis budget for the last few fiscal years.   We would still have the $85 Trillion Federal Obligation hanging over our head.   We will be forced to default on a significant portion of the entitlement commitments that have created this massive Obligation.

As Table 1 below shows, the average citizen has been able to have a lot more disposable income than is affordable for the Federal Government to have a sustainable economic model and this has been happening each and every year since fiscal year 1969.  

  I           A          B             II           V          VI          VII      P       SI
Fiscal                                     Formal                         Gross       Total
Year                                  Cash-Based GAAP-basis Federal   Federal   Pop.   Suppl.
Ended   Receipts  Outlays      Deficit       Deficit           Debt     Obligations      Income
Sep 30 ($Billions) $Billions) ($Billions)  ($Trillions)  ($Trillions) ($Trillions) (M)     ($)  

2012    $2,450.2  $3,537.1  $1,089.4      $6.6           $16.2        $85.4   314  $21,019 
2011      2,303.5    3,603.1    1,298.6        4.5             14.9          80.9   312    14,423 
2010      2,162.7    3,456.2    1,294.1        5.3             13.6          76.3   309    13,916
2009      2,105.0    3,517.7    1,417.1        4.3             11.9          70.5   307    14,007
2008      2,524.0    2,982.5       454.8        5.1             10.0          65.6   304    16,776
2007      2,568.0    2,728.7       162.8        4.2               9.0          59.8   301    13,953 
2006      2,406.9    2,655.1       248.2        4.6               8.5          58.2   298    15,436
2005      2,153.6    2,472.0       318.5        3.5               7.9          53.3   296    11,824
2004      1,880.1    2,292.9       412.3        3.4               7.4          49.5   293    11,604
2003      1,782.3 
    2,159.9        374.8        3.0               6.8          39.1    290    10,345    
2002      1,853.1    2,010.9       157.8        1.5               6.2          35.4   288      5,208
2001      1,991.1    1,862.9      [127.0]       4.5               5.8          30.3   285    15,789
2000      2,025.2    1,789.0      [236.9]       3.9               5.7          25.9   282    13,830

Columns A,B: Source-Tax Policy Center Urban Institute and Brookings Institution
Columns II,V,VI,VII:  Source-Shadow Government Statistics No. 500 Special Commentary Feb 5, 2013
Column P: U.S. Population Source-U.S. Bureau of Economic Analysis
Column SI: Supplemental Income  SI=V/P (GAAP-Basis Deficit/Population)
Note: Federal Obligations=Gross Federal Debt + Present Value of Future Liabilities
Note: Cash-Based Deficit(II) does not exactly equal Outlays(B)-Receipts(A) due to different data sources

Table 1: Supplemental Income per Citizen Produce by USAPonzi

Where is this Supplemental Income Going?

What has happened is this money has been run thru the U.S. and world economy as GAAP-basis Deficit spending and has appeared largely as asset price inflation.  As such it has basically taken money from future taxpayers and passed it to the holders of these assets, a massive wealth transfer.   This money is now held by asset (stocks, bonds, property) owners and the U.S. Government (our taxpayers) will have to come up with the $85 Trillion (as of September 30, 2012) of the resulting Federal Obligation to make those assets money good.

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 Wealth Transfer