It’s funny to watch conservatives give the former Treasury secretary the “Nurse Ratched at low tide” treatment. It really reveals how conservatives have managed to divorce themselves (pun fully intended) from any notion of limited government advocacy. They like Bush because he kills would-be terrorists, and because he’ll appoint judges who support the pledge, uphold the ten commandments, and ban butt sex. If that means bloated government too, so be it.

O’Neill’s a budget hawk. And President Bush probably wouldn’t be facing the deficit and political turmoil he is today if he’d paid O’Neil a bit more heed. Against O’Neil’s advice, for example, Bush doubled foreign aid outlays. Against O’Neill’s advice, he imposed those dastardly steel tariffs. And as Gene points out, O’Neil also advised — back in the surplus days — that President Bush devote a trillion dollars to fully privatizing Social Security, an idea Bush apparently shrugged off.

But most disconcerting, even downright scary, is the report O’Neill commissioned shortly after taking his position from economists Kent Smetters and Jagadeesh Gokhale (disclosure: Gokhale was an economist with the Cleveland federal reserve at the time — he’s now a senior fellow at Cato).

You might know that the federal government doesn’t factor its future obligations into its annual budget. In fact, it oftentimes shifts massive amounts of money from previous years into future years, and then shifts it all back again, all in an effort to stuff big numbers into small spaces.

Given the impending Boomer retirements, the coming ailing of those Boomers, ever-expanding entitlements, and the federal government’s creative accounting methods (commonly known in the private sector as “fraud”), O’Neill worried that the federal government was facing a massive revenue shortage, yet was choosing to remain blissfully ignorant of it by only looking at its budget from year to year.

So he commissioned said report, which employed a method known as “generational accounting,” whereby Smetters and Gokhale added up all of the federal government’s obligations over the coming years, added up all of its projected revenues, then factored the difference.

Here’s the stunner: The federal government faces a projected 44 trillion dollar deficit.

That’s trillion. That’s really not a number any of us can effectively wrap our brains around. It is one-and-a-half times the GDP — of the entire world. It is basically the sum total of every asset owned by the U.S. government. And it gets bigger every year.

O’Neill was fired before the study was completed. And the Bush administration, trying to push a tax cut and a new $400 billion entitlement program, never let it see the light of day.

Fortune magazine has the details. The abstract is here. A reprint that I’m fairly sure violates copyright law can be found, for now at least, here.

(Thanks to reader Steve Skutnik for the tip.)

UPDATE: More from the Atlantic Monthly.

This entry was posted on Tuesday, January 20th, 2004 at 8:01 pm by Radley Balko and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.