U.S. Net Financial Position Continues to Worsen

by Veronique de Rugy

Last week, I mentioned that, considering the explosion in spending that we face, the president and Congress will have some tough choices to make if we want our fiscal outlook to improve.

Here is another way to look at our financial situation: This chart uses the data from the U.S. Department of Treasury’s “Financial Report of the U.S. Government“ for fiscal year 2011, and assesses the United States’ end-of-year net position.  Net position is calculated by netting the government’s assets against its liabilities, as recorded in the U.S. government balance sheet. Just as in the financial statement of a company, this metric provides a general picture of the fiscal health of the United States. 

Assets are primarily comprised of federal property, Troubled Asset Relief Program assets, physical structures, facilities, and equipment, while liabilities are mainly debt held by the public, accrued interest, and federal-employee benefits. In FY 2011, the federal government had $2.7 trillion in assets and $17.4 trillion in liabilities. As a result, the net position of the government in 2011 was negative $14.7 trillion, a 10 percent deterioration from 2010.

This is an optimistic snapshot of the country’s financial situation, since it doesn’t show intragovernment debt (the debt that the federal government owes to other government accounts such as Social Security, which it will probably have to pay back with more borrowing) or unfunded future liabilities.

One thing is sure: This position has seen steadily deterioration since 2000, and unless we put in place serious reforms, it is unlikely to get improve going forward.