Alert
December 16, 2004
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Treasury Reports $11.1 Trillion 2004 GAAP-Basis
Deficit, Which Was Equal to 96% of GDP
Inflation Pressures Will Intensify
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Late afternoon of December 16, in accelerated reporting, the U.S. Treasury released the fiscal year 2004 Financial Report of the United States Government, based on generally accepted accounting principles (GAAP). The reported results were mixed. (The full document is available as a PDF file at: www.fms.treas.gov/fr/04frusg/04frusg.pdf.)
Against respective official deficits in fiscal (September 30) 2003 and 2004 of $377.1 billion and $412.3 billion, the GAAP deficits, excluding accounting for Social Security, Medicare and various retirement programs (see Background Articles on Home page), were $667.6 (revised from $665.0) billion and $615.6 billion (page 61), reflecting an incredulous improvement in government operations.
A meltdown occurred, however, in the GAAP deficit that included accounting for Social Security, Medicare, etc. The annual deficit of $3.7 trillion in 2003 exploded to an annual $11.1 trillion in 2004 (Overall Perspective page 11), which represents 96% of fiscal 2004 GDP.
Most of the increase in the broad deficit measure came from a one-time set up of the net present value of the funding shortfall in the "improved" Medicare system, including prescription drugs. While 2005 will not be as bad, the numbers reflect new liabilities taken on by the government in 2004. Where 2003's $3.7 trillion shortfall was beyond any prospect of containment within the existing system, 2004's results show a rapid downward spiral towards national bankruptcy and hyperinflation.
We have not had a chance to study the statements carefully, and some results, particularly the narrowing of the limited GAAP deficit, are suspect. The GAAP results will be explored in detail in the next regular newsletter, scheduled for release on Wednesday, January 12, 2005.