Jan

24

WCVarones , another reprobate from coastal California, recently wondered how the Federal debt could increase by $3.55 Trillion in fiscal years 2009 and 2010 while, at the same time, the reported deficit increased by only $2.7 Trillion. Surely, the 2 numbers should be the same. Where, oh, where did the $850 billion go?

Varones noted that the answer could not be found in the Social Security Trust Fund, which had increased by only $320 Billion in that period. That still leaves another $530 billion - roughly 15% of the total amount borrowed - unaccounted for.

$100 billion of it can be found in "Government-sponsored enterprise preferred stock" - i.e. money invested by our Treasury in Fannie and Freddie in the form of stock rather than being lent outright. (The OMB does not show that any dividends have been collected.) But that means there is $430 billion (1/8th of the total increase in the debt) that needs to be identified.

Varones notes that the usual conspiratorial explanation has been offered - "crooked accounting". But, as any sane adult must know by now, whatever else artful frauds do, they never, ever have books that fail to balance. (True story: a client came to us once to complain that a private investment had failed. How could this be possible? The spreadsheets had been in perfect order, and every account balanced to the penny.)

The explanation for the missing 1 out of every 98 borrowed dollars can be found in the OMB Mid-Session Review statements. The mid-FYO9 statement shows a financial asset identified as "Direct Loan accounts" having a value of $196 billion at the beginning of fiscal year 2009. The mid-FY11 statement for the same account shows a value of $689 billion. So, over the 2 1/2 year period including fiscal years 2009 and 2010 and the first half of FY2011 the direct loan account increased by $489 billion. That more than takes care of the missing $430B.

Whatever the government's sins, it appears they are still keeping books whose numbers balance. BTW, those "direct loan accounts" are - surprise - "Student Loans".


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