Tuesday, December 16, 2008

The war costs keep coming

The US Treasury department released yesterday its annual accounts for the US government that follow the accrual principle i.e. recognizing an expense when it is incurred rather than when the money goes out to meet it, which could be years from now. Accrual accounting is the kind of thing that governments expect the private sector to do but exempt themselves from it. So one cheer for producing some real accounts. Anyway, here's the punchline from this year's accounts --

... calculate the ‘bottom line’ or net operating cost. In FY 2008, the Government’s ‘bottom line’ net operating cost totaled $1,009.1 billion or just over $1 trillion, a substantial increase over FY 2007’s net operating cost of $275.5 billion.

changes in the actuarial calculations of [Veterans Administration] VA’s veterans benefit liability were the primary reason behind a nearly seven-fold increase in VA’s actuarial and gross costs during FY 2008, compared with a relatively meager decrease in FY 2007 ... The liability increase of $339 billion in FY 2008, when compared to a $26 billion decrease in FY 2007, combine to cause a $365 billion increase in actuarial cost for FY 2008. This was the largest increase by far at VA in recent years and accounted for: (1) approximately 98 percent of the increase in VA total net costs, and (2) about half of the increase in total net cost across the Government. [The Department of Defense] also experienced a significant increase ($110 billion) due to reestimation of its net postemployment benefit liabilities.

In plainer English, the era of $1 trillion deficits is already here, because on a proper accounting basis, the government ran one in the last fiscal year. And the bulk of the reason it did so was because of future obligations to the military.

But George Bush is the one who complains about messes handed to him 8 years ago.

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