By Charles Biderman
I was on Fox Business News on Tuesday’s market close show and left upset. The co-host David Asman ended the chat by implying that I must be a kook for saying that the US government is committing financial fraud. He did not ask, and apparently was not interested in any facts about what why I say that.
So to repeat myself again here is evidence that the US government is committing financial fraud. Again there are a lot of numbers ahead and I will try and make this understandable even if you flunked accounting 101.
First, let us start with the balance of the US, which includes all the assets and liabilities of households. The Federal Reserve’s quarterly Flow of Funds, the Z1, says the US net worth is about $65 trillion. That includes total assets of $78 trillion made up of homes, stocks, cash, bonds, everything. All debts are $13 trillion, about $10 trillion of that mortgages. Subtracting debts from assets and the US net worth sounds like a healthy $65 trillion.
But that does not include existing government debt of $16 trillion and an overwhelming $87 trillion in the present value of future Social Security, Medicare and Pension entitlements. So the truth is that actual US government total debt is more than $100 trillion, an amount greater than the $78 trillion in all assets owned by US households.
This information comes from former Clinton economists, Chris Cox and Bill Archer, in a November 26 Wall Street Journal op-ed. The economists stated that if the federal government were interested in full disclosure, which it isn’t in their words, it would add to the $16 trillion another $87 trillion in obligations. That is the present value of unfunded future Social Security, Medicare and federal government workers future entitlements. The two found that data buried in the April 2012 Medicare Trustees Report.
It is even bleaker when looking at income. After tax income for everyone who pays taxes is about $6.6 trillion a year right now. Compare that $6.6 trillion with the fact that future entitlement expenses grew by $7 trillion this year. That is right. $7 trillion is the amount the US should put aside this year to have enough money to pay future entitlements.
So in other words, if the US government told the truth about its expenses, the actual deficit is not $1+ trillion a year, but $8+ trillion a year, an obviously unsustainable amount since it is greater then the $6.6 trillion in after tax income for all taxpayers. Is it not fraud for our government to hide and bury in unreadable reports such as the Medicare Trustees report that there will no money available for the Social Security and Medicare benefits we are being promised.
My second proof of US government financial fraud is the Census Bureau Advance Monthly Retail Sales report. Each month the Census Bureau economists survey 3,000 retailers and then guess at total retail sales in the entire country, then divided by type. Which do you think is more accurate, that survey of 3,000 retailers or real time data on aggregate sales from Master Card, Visa and the like, that is already being sold to the public. The only reason I can think of why Census Bureau economists ignore Master Card and Visa, is to keep their jobs. To me they are committing fraud against us.
Similarly, both the monthly jobs report by the Bureau of Labor Statistics and the income and savings data from the Bureau of Economic Analysis both avoid and ignore real time data on total employment and incomes embedded within the withheld income and employment tax payments made daily by all employers to the US Treasury. Instead the economists at the BLS and the BEA to come up with their numbers use surveys, six month old historic data and then guesses at seasonal adjustments. This is an antiquated methodology that goes back to the 1960s.
Why would the government economists ignore the truth about jobs and incomes at this critical moment in our economic history? Perhaps to save their own jobs.
Unless financial media types such as Fox Business Dave Asman stop implying that anyone accusing the US government of committing financial fraud has to be a conspiracy theory wackoo, the US government will be able to get away with hiding the truth from us.
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