Our government has been producing a corporate style annual report for more than a quarter of a century. Called the "Financial Report of the United States Government", the report for 2001 is now available as a PDF file--- but load your printer with paper first. You'll print 130 pages, most of them footnotes.

Originally called "the Saltonstall Report" after the respected Republican Senator from Massachusetts, the first "prototype" was released in 1975. Rather than show government affairs on a cash basis, the reports attempt to account for government on a business-like accrual basis. This means they try to reflect promises and commitments in the future as well as money being spent this year.


My copy of the 1975 report, unearthed from the Burns Library of Incredibly Musty Documents, shows that we ended 1975 with $354.7 billion in assets and $1,320 billion in liabilities. That's a negative net worth of $965.7 billion. The liabilities include gross federal debt of $544.1 billion. The asset figure isn't very important--- although it is wildly understated, with gold holdings at a fraction of their market value, etc. The real concern is the growth of government promises of future benefits and payments. The only way to meet those liabilities is by collecting taxes, borrowing, or printing money. A footnote in the report explains that the $499.5 billion accrued liability for Social Security only represents the un-funded liabilities for 30 years, not the $2.7 trillion over 75 years calculated by the Trustees of Social Security. So government liabilities were understated by $2.2 trillion.

Why am I telling you this? Because there is a certain dismal fascination in seeing how this report has changed over the years.


The 1981 report was 33 pages; nearly double the 17 pages of the 1975 report. It told us we had $690.3 billion in assets and total obligations of $3,446.9 billion. This meant that our governments' negative net worth had vaulted to $2,756.6 billion in only six years. The liability figure included $784.4 billion in "borrowing from the public" but excluded $209.9 billion in "intra-governmental" holdings. (Watch this distinction grow.)

A footnote explains that the $1,430 billion liability for Social Security represents the entire 75-year period figured by the Social Security trustees. If we want an apples-to-apples comparison, the 1975 figure adjusted for the full liabilities of Social Security would be $3,165.7 billion. So things were getting better.


The 1991 report weighs in at 47 pages and comes complete with a two-page letter from an independent accounting firm. It tells us that government assets are now $1,393.7 billion but obligations have risen to $4,540.1 billion. This leaves a negative net worth of $3,146.4 billion--- a nominal change over ten years. Total borrowing from the public, a listed liability, is now $2,687.2 billion but does not include the $911.7 billion held in government accounts such as the Social Security trust funds.

But, gee whiz, they left something out.

Social Security. (Don't you hate it when that happens?) Fortunately, it appears as footnote 18 where we learn that the un-funded liabilities of Social Security are $6,594.6 billion. Talk about big rug lumps. It's a 6.6 trillion dollar footnote, a full decade before Enron. Adjusting for an apples-to-apples figure that includes Social Security, government negative worth has more than tripled to $9,741 billion.

Who was the "independent accounting firm"? Arthur Anderson & Company. No joke.


The most recent report continues the Arthur Anderson method, but lacks their blessing. Indeed, a letter from David M. Walker, the Comptroller General, declines to render an opinion on our financial condition for the 5th year in a row due to the inadequacies of government accounting.  

The report totals 130 pages and tells us that government assets are only $926.1 billion while government liabilities are $7,384.9 billion. That means we have a negative net worth of $6,458.8 billion. Government obligations held by the public now total $3,319.8 billion.

There is $2,462.0 billion of that weird "intra-governmental debt" hoarded in government trust funds. It isn't counted, although it now amounts to more than two years of individual income tax collections and will ultimately have to be redeemed to pay retirement benefits and health costs.

The footnotes tell us that Social Security has un-funded liabilities of $4,207 billion, and Medicare A&B un-funded liabilities of $12,814 billion. That brings the total negative net worth to $23,479.8 billion.

Although debt held by the public declined by $90.1 billion in 2001, thanks to our purported surplus, intra-governmental debt climbed by $231.1 billion and government net worth fell $513.4 billion further in the hole. In the same year!

Go figure. Makes you really want to stay away from the bad years, doesn't it?

The figures for each year are shown in the table below.

The Accelerating Decline of U.S. Government Finances
All figures taken from government documents and in billions of current dollars
Item 1975 1981 1991 2001
Assets $         354.7 $       690.3 $ 1,393.7 $           926.1
Total Liabilities ($1,320.4) ($3,446.9) ($4,540.1) ($   7,384.9)
--- Debt held by public ($     544.1) ($     784.4) ($2,687.2) ($   3,319.8)
--- Un-funded Social Security ($     416.0) ($1,430.0) ($             0.0) ($                 0.0)
Stated Net Worth ($     965.7) ($2,756.6) ($3,146.4) ($   6,458.8)
+Adjustment for 75 year S.S. ($2,200.0) ($             0.0) ($6,594.6) ($17,121.0)
Comparable Net Worth ($3,165.7) ($2,756.6) ($9,711.0) ($23,479.8)
Excluded Intra-govt. debt    Nominal ($     209.9) ($     911.7) ($   2,462.0)
Source: Treasury Department

What's truly important here?

Just this. Discussions of formal Treasury debt and federal deficits are misleading or useless.   The real story of government finances isn't in the formal promises of Treasury notes and bonds; it is in the escalating promises of future benefits and payments.

2001 Financial Report of the United States Government