January 1, 2014
Open Letter to:
The Supreme Court of the United States of America
Eric Holder U.S. Attorney General
The President of the United States of America
The Congress of the United States of America
Harry Reid Senate Majority Leader
John Boehner Speaker of the House
John Cornyn Texas Senator
Ted Cruz Texas Senator
Ben Bernanke Outgoing Federal Reserve Chair
Janet Yellen Incoming Federal Reserve Chair
Paul Ryan House Budget Committee Chair
Patty Murray Senate Budget Committee Chair
Tom Coburn U.S. Senator (R) Oklahoma
Erskine Bowles Co-Chair, National Commission on Fiscal Responsibility and Reform
Alan Simpson Co-Chair, National Commission on Fiscal Responsibility and Reform
David A. Vaudt Chairman Government Accounting Standards Board
Steve Forbes American Publishing Executive
Jim Cramer Television Personality-CNBC
David Faber Television Personality-CNBC
Joe Kernen Television Personality-CNBC
Larry Kudlow Television Personality-CNBC
Steve Liesman Television Personality-CNBC
Rick Santelli Television Personality-CNBC
Andrew Ross Sorkin Television Personality-CNBC
Neil Cavuto Television Personality-FOX News
Lou Dobbs Television Personality-FOX News
Bill O'Reilly Television Personality-FOX News
Greta Van Susteren Television Personality-FOX News
Bill Moyers American Journalist
Rush Limbaugh Radio Personality
Doug Casey Economic Newsletter-CaseyResearch.com
George Friedman Global Intelligence Newsletter-Stratfor.com
Michael Tanner Senior Fellow-Cato Institute
John Mauldin Financial Newsletter-MauldinEconomics.com
John Williams Financial Newsletter-ShadowStats.com
Robert Shiller Nobel Laureate in Economics
Paul Krugman Nobel Laureate in Economics
Jeremy Siegel Economics Professor-Wharton
Laurence Kotlikoff Economics Professor-Boston University
Gerard Baker Editor-in-Chief Wall Street Journal
Scott Burns Newspaper Columnist-Dallas Morning News
Will Deener Newspaper Columnist-Dallas Morning News
The fiscal policy of the Government of the United States of America is corrupt and fraudulent! For the last 45 years the U.S. Government has been using fraudulent accounting techniques to understate their out of control committing and spending of the U.S. taxpayer's money. By using Cash Accounting to assess and report our financial condition they have been able to conceal from most people in the U.S. and the rest of the world just how much in debt we truly are. We MUST begin using an accounting system that reflects our true financial health.
Every Member of Congress and every senior member of the Administration should be indicted on fraud and corruption charges if they vote for or support any financial budget that is based on our current Cash Accounting methodology.
Just how fraudulent is the U.S. Government reporting of our financial condition? Well let's look at Fiscal Year 2012 which ended Sept 30, 2012 since this is the last year for which we have an official Government report.
Washington Reported Washington Should Have Reported
Cash Accounting GAAP Accounting
Debt Obligation
Deficit $1,087 Billion $6,600 Billion
Deficit per Citizen $3,462 $21,019
Debt/Obligation $16.1 Trillion $85.4 Trillion
Debt/Obligation per Citizen $51,118 $271,974
Remember our Obligation is our Debt PLUS the present value of the Unfunded Liabilities for the people that are currently eligible for these social benefits. But even that does not represent our total liabilities since we also have accruing liabilities for people that are not yet but will become eligible for these social benefits.
This is the primary reason why the financial reporting from the Federal Government is so far off base. The Federal Government is essentially ignoring the liabilities that are accruing for the social benefits for what is now nearly half of the population of the United States!!!! Provisions have not been made in our budgeting process for how we are going to pay for these social benefits!!!!!! We basically had a $70 Trillion (GAAP-basis) hole in our pocket as of September 30, 2012!!!! ($85.4Trillion- $16.1Trillion = $69.3 Trillion). That hole in our pocket was 4.5X our GDP in Fiscal Year 2012.
Now let's look at what has happened since the end of Fiscal Year 2012, i.e the last 15 months. These numbers are based on estimates for what happened in Fiscal Year 2013 and the projections for the first quarter of Fiscal Year 2014.
Washington Reported Washington Should Have Reported
Cash Accounting GAAP Accounting
Debt Obligation
September 30, 2012 $16.051 Trillion $85.400 Trillion
December 31, 2013 $17.227 Trillion $93.219 Trillion
Change in 15 months $1.176 Trillion $7.819 Trillion
Change per month $78.4 Billion $521 Billion
Change per day $2.61 Billion $17.4 Billion
Change per day per Citizen $8.23 $54.88
Debt/Obligation per Citizen 1/1/14 $54,343 $294,066
One can make several observations from the above table.
1) the monthly change in our debt is now $78.4 Billion which closely approximates the $75 Billion per month of QE that the Fed is projecting for January 2014. So the Fed is printing enough to cover our cash deficit.
2) our Obligation is increasing by $521 Billion a month so the Fed had better get prepared to start printing money a whole lot faster UNLESS Congress gets serious about fixing the problem.
3) we are in effect borrowing $17.4 Billion EVERY DAY and last month the people in Congress were patting themselves on the back for a two year budget agreement that will save a total of $22 Billion in Fiscal Year 2014. So they saved a day and a half worth of borrowing. Talk about out of touch with reality!!!!
4) we are in effect borrowing $54.88 every day for every man, woman, and child in the United States.
5) every man, woman, and child in the United States (on average) owes the Government $294,066 to start the new year.
Now let's get back to that $70 Trillion hole in our pocket that we had on Sept 30, 2012, the present value of our Unfunded Liabilities (our Obligation minus our Debt). As of December 31, 2013 that hole in our pocket is ( $93.2 Trillion - $17.2 Trillion ) $76 Trillion.
The www.usaponzi.com website includes a spreadsheet model (USAPonzi Fiscal Model) of the U.S. Government's financial condition for the next ten years and shows both the current Cash Accounting numbers and the GAAP Accounting numbers. This model clearly shows that with current policy our Deficit, Debt, and Obligation will continue to spiral out of control.
We have a U.S. Economy that is riding on the full faith and credit of the Federal Government and we are essentially in debt by $93 Trillion (GAAP-basis) and by $205 Trillion (Fiscal Gap basis) with an income stream of currently about $2.8 Trillion per year to both pay our current bills and to service that debt. Our current Cash Accounting methodology does not appropriately reflect the magnitude of this current liability. As is evident by this assessment the "virtual interest" on our "virtual debt" is more than twice as big as our "real" income.
The further complication will be that by taking the actions necessary to resolve this issue we will dramatically reduce that real income stream. But we really have no choice as we must assess and report properly before we can truly fix the problem.
This problem must be communally accepted by Congress and the U.S. citizenry but prompt action by Congress to consider and approve the INFORM ACT (www.theinformact.org) is essential to getting the United States of America on a sustainable fiscal path.
John W. White
Retired Information Technology Executive
214-762-1678
jwwhite38@outlook.com
www.usaponzi.com
Plano, TX