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March 04, 2008

The Citizen's Guide to the 2007 Financial Report of the United States Government

Frsummary20071_1 Posted by Michel Lazare

On February 14, 2008, the US Treasury Department and the Office of Management and Budget (OMB) released a short report called The Government’s Financial Health:  A Citizen’s Guide to the 2007 Financial Report of the United States Government. The Guide is a short and reader-friendly summary of the key messages contained in the 2007 Financial report of the United States Government, i.e., the annual report on the financial accounts as well as an analysis of fiscal sustainability in the absence of policy changes.

For readers who would not be familiar with the content of the Financial Report, the tone of the Citizen's Guide may be seen as surprisingly candid for an official document. For instance, the title of the reverse of the cover page reads: "The Government Is On An Unsustainable Fiscal Path." the same page indicates that, in the absence of policy changes, by 2080 "total government cost will be more than three times revenue." A good example of fiscal transparency at work.

Similar efforts to enhance transparency and create reader-friendly summary reports of key fiscal messages exist in a number of developed countries. Other undertakings by  Non-Governmental Organizations, like the Open Budget Initiative , also deserve to be noted in this area.

 

  • Frusg07

The press release (full text below) noted:  this is the first time the Federal government has issued this type of summary.  A similar summary report will be published annually hereafter. While it is true that this particular form of the "Citizen's Guide" is an innovation, it also true that OMB used to publish other types of citizen's guides on the president's budget prior to FY2003: see for instance this version of the citizen's guide on FY2002.

The Citizen's Guide contains information on "where we are now" and "where we are headed". The key points in these two categories are as follows:

"Where We Are Now

  • Strong growth in individual incomes and corporate profits contributed to 4 consecutive years of tax revenue growth—revenue was up by 46 percent since 2003 to $2.6 trillion in 2007. Social Security and Medicare tax withholdings accounted for almost a third of total revenue in 2007.
  • Social Security Trust Funds’ revenue exceeded what the government paid out in benefits by $186 billion in 2007. This surplus was credited to the Trust Funds.
  • The government’s total operating cost remained relatively constant—$2.9 trillion in 2006 and in 2007.
  • Revenue increases and relative cost stability resulted in a drop in the government’s net operating cost—to $276 billion—and a decline in the unified budget deficit (budget deficit)—to $163 billion in 2007.
  • To fund cumulative budget deficits, the government has borrowed a total of $5 trillion from the public as of the end of fiscal year 2007. The government has also borrowed excess annual cash flows from the Social Security and Medicare Trust Funds and similar funds to finance other government cost. Including interest, the government owes $4 trillion to these funds, which is backed by the full faith and credit of the government, resulting in total federal debt of $9 trillion."

"Where We Are Headed

  • As baby boomers retire and health care cost continue to rapidly rise, the cost of the Social Security, Medicare, and Medicaid programs will account for a growing portion of government cost.
  • Absent reforms, the Social Security Trust Funds will be exhausted in 2041 and the Medicare Part A Trust Fund will be exhausted in 2019. Revenue dedicated to these entitlement programs under current law will not be enough to pay for scheduled Social Security and Medicare Part A benefits.
  • The projected cost of all federal programs will exceed available resources. Unless the government brings program cost in line with available resources, resulting budget deficits will be so large that the government will not be able to borrow enough to fund them.
  • Our children and grandchildren will bear a greater burden of the cost if we delay in implementing fundamental reforms."

Below is the text of the press release announcing the publication of the Citizen's Guide:

FOR IMMEDIATE RELEASE
February 14, 2008
Contact: Jennifer Zuccarelli, Treasury Department, (202) 622-8657
          Jane Lee, OMB Communications, (202) 395-7254

Citizen’s Guide Provides Easy Public Access
to Government’s Financial Report

Washington The Treasury Department and the Office of Management and Budget (OMB) today released The Government’s Financial Health:  A Citizen’s Guide to the 2007 Financial Report of the United States Government.  The eight-page Citizen’s Guide provides readers with a user-friendly reference tool for finding key results of the Financial Report released in December 2007.  This is the first time the Federal government has issued this type of summary.  A similar summary report will be published annually hereafter.

Drafted in coordination with the U.S. Government Accountability Office (GAO), the Citizen’s Guide provides an overview of the U.S. government’s short-term and long-term financial outlook, including the government’s biggest fiscal challenge, the unsustainable growth in entitlement programs.

In the next 35 years, the automatic spending portion of the budget will completely swallow all available revenue, which means that resources will not be available for some of the Federal government’s basic responsibilities, such as national defense and homeland security.  The Citizen’s Guide makes this kind of information easily available to a broad audience, explaining these realities in clear and stark terms. 

The Citizen’s Guide is available electronically at http://www.fms.treas.gov/frsummary/index.html.

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