The United States Government Accountability Office (GAO) just released a Report to the Secretary of the Treasury involving the financial audit of the Bureau of Public Debt’s (BPD) “Fiscal Years 2011 and 2010 Schedules of Federal Debt.”
Every page is definitive proof that our country is truly broke. Our national debt is so large that measures must be taken immediately to address the out of control spending that is going to burden future generations yet unborn and destroy our economic superpower status.
Since 1997, GAO audits the Bureau of Public Debt annually to determine if schedules are reliable and BPD maintains effective control over financial reporting “relevant to the Schedule of Federal Debt.” GAO “tests compliance with selected provisions of laws related to the Schedule of Federal Debt.”
The Department of the Treasury manages the federal debt. Our federal debt is composed of Treasury securities held by the public and federal government accounts called “intragovernmental debt holdings.” These holdings represent 230 federal agencies, one agency owing money to another.
Debt held by the public represents the amount of money the federal government has borrowed from the public to finance “cumulative cash deficits.” Cumulative cash deficits represent all the previous years’ deficits combined.
The public is comprised of individuals, corporations, state or local governments, the Federal Reserve System (our so-called central bank), and foreign governments. The majority of debt is in the form of Treasury securities such as bills, notes, bonds, and Treasury Inflation-Protected Securities (TIPS) that are sold through auctions and then resold by whoever owns them.
“Intragovernmental debt holdings represent federal debt owed by Treasury to federal government accounts—primarily federal trust funds such as Social Security and Medicare—that typically have an obligation to invest their excess annual receipts (including interest earnings) over disbursements in federal securities.”
Americans who pay taxes and pay attention (pun intended), know that there are no such trust funds or “lock boxes” for Social Security and Medicare. The money is spent when receipts come in from taxpayers.
“Most federal government accounts invest in special nonmarketable Treasury securities that represent legal obligations of the Treasury and are guaranteed for principal and interest by the full faith and credit of the U.S. government.”
Debt holdings between government’s agencies are not shown as balances on the government’s consolidated financial statements because they represent one agency of the federal government owing another under “U.S. generally accepted accounting principles.” “When the federal government’s financial statements are consolidated, those offsetting balances are eliminated.”
Debt held by one agency to another does not typically require cash payments from the current budget (they are electronic voodoo credits) and are thus not considered a burden on the current economy.
Intragovernmental debt and interest payments are a claim on future resources and a burden on future taxpayers and the future economy that must make good on the electronic credits. “When federal trust funds redeem Treasury securities to obtain cash to fund expenditures, Treasury usually borrows from the public to finance these redemptions.”
Debt held by the public is considered more real and a burden on today’s economy because it is cash. Borrowing from the public absorbs resources that should be available for private investment. It thus crowds out private investment. Interest paid on this debt reduces budget flexibility since it cannot be controlled directly.
GAO found out during its audit that during the last 4 fiscal years, total federal debt has increased by $5.788 trillion or 64 percent, from $8.993 trillion as of September 30, 2007 to $14.781 trillion as of September 30, 2011.
“The increases to total federal debt over the past 4 fiscal years represent the largest dollar increases over a 4-year period in history.”
Rounding the numbers and presenting them in trillion dollars, our federal debt has increased from $8.9 trillion in 2007 to $14.8 trillion as of September 30, 2011.
The Treasury declared a debt issuance suspension period from May 16, 2011 through August 2, 2011.
“Treasury utilized a number of extraordinary actions within its legal authorities to avoid exceeding the debt limit.”
The extraordinary actions undertaken by the Treasury included suspending investments to:
- Government Securities Investment Fund of the Federal Employees’ Retirement System
- Civil Service Retirement and Disability Fund (CSRDF) and disinvesting a security held by CSRDF
- the Postal Service Retiree Health Benefits Fund (Postal Benefits Fund)
- Exchange Stabilization Fund (ESF)
- New issuances of state and local government securities from May 6-August 1, 2011
The U.S. Government Accountability Office reports, “The debt held by the public has increased from roughly 62 percent of Gross Domestic Product (GDP) at the end of fiscal year 2010 to roughly 68 percent at the end of fiscal year 2011.”
GDP represents the monetary value of all final goods and services produced in a year in the U.S. Six percent of our GDP has been squandered in one year by this administration on various schemes, bailouts, stimuli, and faux job creations.
Treasury reporting shows that foreign ownership of Treasury securities represents a significant portion of debt held by the public, 46 percent as of June 30, 2011. In the last ten years, June 30, 2001-June 30, 2011, Treasury International Capital estimates securities held by foreign and international investors to be $4.51 trillion. In ten years, the debt to foreigners rose from $983 billion in 2001 to $4.501 trillion.
Overview of federal debt managed by the Bureau of Public Debt:
- Gross Federal Debt Outstanding in 2011 is $14.781 trillion
- Interest expense in 2011 is $454 billion
- Fifty-nine percent or $5.625 trillion debt will mature within the next 4 years
- Intragovernmental debt holdings of 230 individual federal agencies consist primarily of balances in the Social Security, Medicare, Military Retirement and Health Care, and Civil Service Retirement and Disability trust funds, 91 percent of the $4.654 trillion
- Interest paid on Treasury marketable securities is 0.1% for T-bills, 2.3% for T-notes, 5.8% for T-bonds, and 2.8% for nonmarketable Treasury securities
- Federal Debt held by the public includes debt held by the Federal Reserve Bank (FRB) of New York in the System Open Market Account (SOMA) holdings for the purpose of conducting monetary policy
The Government Accountability Office demonstrates with current numbers how truly broke our country is and the “unsustainable fiscal path driven by structural imbalance between revenues and spending for major entitlement programs.” In order to prop up the fragile economy, the Government Accountability Office (GAO) recommends that immediate action must be taken involving both federal spending and revenue. (Source GAO)
Canada Free Press
