John Ransom

The budget problem that the country faces isn’t merely big.

It isn’t even really, really big.

It’s much bigger, and more dangerous, in actual fact, than politicians are willing to acknowledge.

Think of the biggest number you can.

Yeah. It’s bigger than that.

The Congressional Budget Office says that if we continue at our current rate of spending, we’ll  “chalk up nearly $7 trillion in red ink over the next 10 years,” according to Reuters.

Yawn. Think bigger than that.

Because that number’s not even close to the size of the real problem we have. $7 trillion is just a fraction of the liabilities of the government as it doesn’t take into account all the “off-the-book” items.

You might remember “off-the-book” accounting. It made a stunning debut in the Enron scandal.

Oh.

You thought politicians fixed that problem?  They did. The “fix” doesn’t apply to government accounting; it just applies to the rest of us.    

While experts usually peg the unfunded portion of pension liabilities at around $1 trillion, that number is based on reports from public pension managers who are anxious to downplay the size of the gap in pension liabilities.

If real-world accounting methods are used to gauge the pension gap- you know, the methods that private pension managers have to use to stay out of prison- the states owe about $3 trillion to pension funds that they don’t have.

But, hey, what's $2 trillion more or less? 

Because, still, our problem is much bigger than that.

The IMF yesterday called upon the U.S. government to “make explicit its guarantees of the housing-finance market and bring them fully onto the government balance sheet.”

The IMF has this silly notion that the government should stand by loans it’s guaranteed and add the bill to the balance sheet.  

Forbes’ Bill Bonner reckons  the “total bailout bill…may exceed $20 trillion.”

The IMF stated the obvious by saying that government-guaranteed, easy credit helped drive prices up and create a real estate bubble in the first place.

So far that’s $7, plus $3, plus $20 trillion.


John Ransom

John Ransom is the Finance Editor for Townhall Finance.