The current government shutdown is a reminder of the dysfunction that afflicts our political system in Washington. At issue is the Affordable Care Act of 2010 (also known as Obamacare). The dispute between Democrats and Republicans touches at the core of the philosophical disagreements between the two Parties about the size and scope of government. While much debate has been had about specific flaws in the Obamacare legislation, there has been little discussion about the long-term costs of the program.
Truth In Government has prepared a memo (see below) which details the cost of Obamacare over a 75-year period. The Affordable Care Act is projected to add around $17 trillion in liabilities to the federal government’s Medicaid liability—this is due to the added costs as a result of the expansion of Medicaid enrollees that the new law now makes eligible for benefits. At the same time, combined liabilities for programs such as Medicare and Social Security are estimated around $38 trillion. In all, when America’s long-term entitlement and pension liabilities are properly accounted for, the federal government’s national debt calculated under professional "accrual" accounting principles easily exceeds $70 trillion.
While we are fast approaching the statutory debt limit of $16.9 Trillion (determined under the rudimentary cash basis of accounting used in the federal budget process), the debate on Obamacare and the issue of long-term debt strikes at a more serious issue—the misleading accounting system politicians use in Washington. At its core, the cash basis system of accounting (a system which, as you know, records financial transactions when income is received and expenses are paid) is a faulty way of measuring the government’s financial position and costs of operation. Elected officials in Washington are accustomed to cash basis accounting because it provides politicians with the advantage of currying favor with today’s voters at the expense of tomorrow’s taxpayers. In essence, it means that politicians can make promises to their constituents about obligations to pay out benefits while deferring the costs to future years. And while these costs may not affect us in the short-term, they are burdens which our children and future generations of Americans will be responsible to pay off. Such debt burdens threaten the future prosperity of the next generation and their shot at the "American dream". As adults, we instinctively know that this is not fair and that we have a moral responsibility to ensure this does not happen.
Truth In Government continues to maintain that implementing government-wide accrual accounting for federal budgeting, financial reporting, and performance measures is the most effective way to ensure that future generations of American taxpayers will be protected from a crushing debt burden. Last month, I published an article in The Hill entitled “Why We Need Accrual Accounting In Washington”. In reading this article, you will see that government-wide accrual accounting for budgeting, financial reporting, and performance measures has been adopted by the national governments of Australia, New Zealand, Canada and the UK; and, these countries lead the way as paragons of fiscal responsibility and financial sustainability, while the U.S. ranks almost last out of 34 public ranked developed nations (see attached Index). In addition, the article also underscores that the concept of accrual accounting for the U.S. government has been a publicly discussed issue since the time of Harry Truman’s presidency. I encourage you to read it and the memo below on "Obamacare" to get a better understanding of why this issue is so critical to the long-term prosperity of our nation.