The Federal Government’s Finances Are a Total Wreck: New at Reason

The federal government’s finances don’t look good, and the biggest liabilities don’t even appear on the official balance sheet.

Marc Joffe writes:

The federal government’s latest financial statements came out last week and they paint a dire picture of our nation’s fiscal health. It’s not just the annual deficit, which is too large and growing. The new report shows trillions in long-term liabilities that could burden the country for years to come. And it suggests that financial management in large government agencies, like the Department of Defense, is appallingly poor.

The federal government reports assets of $3.5 trillion and liabilities of $23.9 trillion yielding a negative net position of $20.4 trillion. Although this last amount is similar in size to the national debt, net worth is conceptually different.

Federal audited financial statements use accrual accounting, which means that obligations are recognized as they are incurred. For example, the


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