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States with Balanced Budget Amendments Are $1 Trillion in Debt 8/3/2011
It all depends on how you count.
Our recent study, "The Financial State of the States", proves that it will be fruitless to pass a Federal Balanced Budget Amendment. That's because governments do not use the same accounting that you and I use. The way the federal budget is currently calculated even with a balanced budget requirement in place we would still be more than $75 trillion is debt.
Do you believe the federal government owes our seniors the Social Security and Medicare benefits they have been promised? Do you believe our veterans and federal employees are owed the retirement benefits they have been promised? Well, the federal government DOES NOT believe these promises are liabilities of the federal government and does not include them in the budget calculations.
A good example is the Prescription Drug Bill. That one piece of legislation added $8 trillion to our unfunded liabilities. How much of this cost was included in the budget calculation? Zero in the year it was passed. The ten year budget calculations included less than 1% of this cost. So even if we had a balanced budget amendment in place at the time this bill was passed, we will would have increased our debt by $8 trillion.
If the desired effect of a Balanced Budget Amendment is to stop burying our children in debt, then it must include provisions for truth in accounting.
You are correct. Future Social Security and Medicare benefits are not liabilities.
In the order of obligation to pay, they are on level 4, the lowest level to fulfill, according to the federal government.
Veterans and federal employees liabilities ARE included on the balance sheet - at around $5 trillion.
They are not funded liabilities, as their trust funds have been lent to the Treasury to pay for current expenses (similar to the Social Security trust fund).
Part D is, indeed unfunded, if looked at from the government-wide budget perspective.
From the trust fund perspective, it is fully funded!
Can you believe?
I have governmental excerpts and links to back all my points for those who are interested.
Posted by Don Levit on 8/4/2011 1:32:35 PM
Veterans and federal employees liabilities ARE included on the balance sheet, but the accruing benefits are not included in the budget. According to OMB, the Medicare and Social Security Trust Funds may have assets in them, but those assets are liabilities of the Treasury Department. Therefore the government of the whole has no assets set aside for Social Security benefits.
Posted by Sheila on 8/4/2011 11:02:20 PM
As I understand it, federal employees have 2 retirement plans - a defined contribution plan and a defined benefit plan.
The defined benefit plan is "funded" with (unfunded) Treasury securities, for the money has been loaned to the Treasury.
The defined contribution plan has assets like typical private sector plans.
Is this your understanding, too?
When the federal government borrowed against the federal employees retirement benefits, it borrowed from the defined contribution plan, right?
This is because the defined benefit plan was already borrowed to the hilt.
Let me know where I may be mistaken and/or correct.
Excerpts and links would be great.
Posted by Don Levit on 8/5/2011 8:02:17 PM
I am not sure how much the federal government can borrow from the federal government employees’ retirement plans. It is my understanding that the Thrift Savings Program is handled by Wells Fargo (and/or other investment organizations) and the money is invested as each employee wishes.
Before the debt ceiling deal was made to keep the government a float it appears that the federal government borrowed from the federal employees' retirement plans.
Posted by Sheila on 8/5/2011 11:09:05 PM
I started wonrkig for the state of Illinois at the age of 37, I spent $38,000 of my own money buying back my military service credits so I could retire at the age of 55 with 20 yrs of service for the taxpayers of Illinois protecting them from the criminals of this state. Now I was told on 3-28-11 that the state lawmakers have told our union today that they want to eliminate our pensions completely. If this is done I feel the state should pay me what I could have made by investing this $38,000 plus my monthly contributions to my pension which is $588.00 per month for the last 16 yrs. If I had known at the last minute these worthless lawmakers would be willing to become turncoats I never would have accepted employment with this state. let alone allow them to waste my life and money!!!