Re: Projections in the State of the Union address

hal@rain.org
Fri, 22 Jan 1999 16:29:53 -0800

Damien Sullivan, <phoenix@ugcs.caltech.edu> writes:
> One oddity about the federal gov't is that it has no budget for investment.
> Corporations and many state/local gov'ts do, making a distinction between
> running expenses and long term investment, such as airports or water supplies.
> If you buy a house with a $200,000 mortgage, you'd view that as taking a
> $200,000 mortgage on your books, with payments going into future expenses.
> The federal gov't would view that as buying a house with a $200,000 deficit
> for that year.

Unfortunately, it also does the same thing in the other direction. This Social Security "surplus" does not count all the promises the government has made in the future. If you buy a house, you're getting an asset to more than balance the liability of the loan you took to buy it. When you promise someone that you will take care of him financially when he's old, you are taking on a liability. The government's liabilities amount to a huge amount, many times the budget or national debt.

(Of course, the government can back out of their commitments perhaps more easily than a private party can.)

Hal