There’s hardly anything that POTUS loves to brag about more than his ‘economic success’. He is, after all, a self-proclaimed “capitalist”.
Even in last week’s State of the Union address, he boldly claimed that he “cut the deficit by more than $1.7 trillion– the largest deficit reduction in American history.” And he’s made that same assertion over and over and over again.
Unfortunately it’s a complete lie. And just yesterday the Treasury Department released financial documents proving it.
Every year the federal government publishes an annual financial report; it’s sort of like what big public company like Apple does. The annual report contains financial statements, plus hundreds of pages of discussion, details, and footnotes.
And yesterday afternoon they released the annual financial report for Fiscal Year 2022, which just ended a few months ago.
It goes without saying that the government’s financial condition is completely atrocious.
Their “net financial position”, which is sort of like the net worth of the federal government, fell to MINUS $34.0 trillion… which is worse than the MINUS $29.9 trillion in FY21.
The projected social security funding deficit also got worse… from $71 trillion to $75.9 trillion.
The real headline to me, though, is the budget deficit lie. The President claims that deficit last fiscal year was $1.4 trillion, and that he (and he alone?) brought it down by $1.7 trillion. But that’s not true at all.
It turns out that the “budget deficit” is actually an inaccurate figure that can easily be manipulated. If you’re a finance or accounting type, you might be surprised to learn that the budget deficit is determined on a ‘cash basis’ and not ‘accrual basis’.
This means that officials can easily accelerate certain revenues and push off certain expenses to massage the data and make the budget deficit appear better than it really is.
Businesses aren’t allowed to do this. Nearly every other organization in the country of any reasonable size has to follow strict accounting rules, booking revenue when it’s earned, and accruing expenses when they’re incurred.
This provides a more honest, transparent, and standardized way of reporting financial results.
So whenever they talk about the ‘budget deficit’, this is really just a manipulated number that doesn’t conform to proper accounting standards.
Naturally this raises an important question: how much would the federal government’s annual budget deficit be if they conformed to those proper accounting standards? i.e. the same ones that every major corporation has to follow?
Well, lucky for us, we don’t have have to guess. Because the government actually publishes that number too.
They call it their “Net Operating Cost”. And it essentially represents the REAL budget deficit.
It turns out that the FY22 Net Operating Cost of the federal government was MINUS $4.1 trillion. And that figure was MUCH worse than FY21’s Net Operating Cost of $3.1 trillion.
So this guy did not, in fact, “cut the deficit”. The real deficit, as determined by Net Operating Cost, INCREASED by a trillion dollars.
There’s so much more in this report, though.
One of the other interesting points, in fact, is that the government actually failed its audit. Again. The Comptroller-General states very plainly that there are numerous “material misstatements” in the government’s financial reporting and internal controls.
There are actually laws that are supposed to prevent this from happening. Twenty years ago Congress passed something called the Sarbannes-Oxley Act, which imposed CRIMINAL penalties for company executives who fail their audits.
If the federal government were held to the same standard as the private sector, dozens of officials should be facing jail time right now. Instead they’ll retire to their generous, fully-funded pensions and receive lavish board seats and prestigious awards. They will never be held accountable.
You, on the other hand, will have to bear the costs of their incompetence, in the form of higher taxes, inflation, reduced Social Security, and other broken promises.
Personally I find it extremely unethical and unjust that the irresponsible, criminally incompetent decisions of politicians and bureaucrats should be paid exclusively by the citizens.
It’s just like all the destructive decisions they made during the pandemic. They will never be held accountable for the mental health crisis, the suicides, the substance abuse, the entire generation of children who fell behind.
Nope. There will never be so much as an inquiry. Instead they’ll make millions from their memoirs where they cast themselves as heroic saints who saved the world.
This is the topic of our podcast today.
We start off with another historical example showing that, even though our problems are gargantuan, they are fixable. Good leadership works wonders, and it is possible to put the government’s finances back on the right track.
Unfortunately there is a dearth of real leadership. Instead we have people who are incapable of telling the truth or even recognizing real problems, let alone solving them.
So don’t hold your breath that they’re suddenly going to turn things around.
The Roman Emperor Marcus Aurelius used to write in his works on stoic philosophy that we shouldn’t stress about the things we cannot control… but instead to put our energy into the things that we can.
That’s great advice, and it’s an excellent way to think about these national and global problems.
And in today’s episode, I walk you through a few specific strategies to really move the needle in the right direction for yourself, in ways that you absolutely control.