Attempt to assess the US Government Balance Sheet

1. No official balance sheet ?
A google search on 'US Government balance sheet' returns many results, but I could not find anything that looked like an official US Government Balance Sheet. If you know more about this, do not hesitate to post some comment. I´d be happy to learn more on the subject.

According to this page, "the government has no accurate balance sheet of what it owns and what it owes".

So far, I can find NO official balance sheet of the US Government.

2. Debts (liabilities)

2.1 US Government Debt latest number
The official page from the US Treasury:
http://www.treasurydirect.gov/NP/BPDLogin?application=np

The debt of the US government is well documented.
See here for some input:
http://en.wikipedia.org/wiki/United_States_public_debt
http://www.brillig.com/debt_clock/

It is agreed by most sources that the US government debt is currently around $10.6 trillion. In the diagram below, I used the figure $10 trillion for convenience although it is not completely accurate.

Though it is important to note that some of the US Government obligations are not part of the official debt:
- Fannie Mae and Freddie Mac on- or off-balance sheet obligations are about $5 trillion. Would these agencies become insolvent (which I think is most likely), and the US Government would have to fill the gap. Therefore these are additional off-balance sheet liabilities.
- some of the guarantees made during the financial crisis of 2008 are also not part of the official debt, and therefore are potential off balance sheet liabilities.


2.2 US Government Debt in the past

Paul Kedrosky has a post about the public debt, where he shows the following graph from Martin Wolf at the FT:

The US Government public debt is currently at 75% of US GDP.

3. Assets
The most interesting input I have read or heard about the US government assets came from Bill Ackman in an interview by Charlie Rose on 11th November 2008.
The video interview can be found here. A transcript of the interview can be found here.
The part I am interested in for the topic of this post is the following quote from Bill Ackman:

"The U.S. government is incredibly solvent. People get concerned about an extra trillion or two of debt. That’s a very big number, but you have to remember that the government owns 35 percent of every corporation because they have taxing power. The government owns 40 percent of every wealthy individual’s earning power. That’s a big off-balance sheet asset."

I guess these "off balance sheet assets" are the main reason why so many investors still buy US Treasuries.

4. Temporary conclusion

So far, everything I could gather is summarized in the following table:

I do not know if the equity (or net worth) makes any sense for a government. It is not like it´s for sale, is it?


Nevertheless, this diagram is at first attempt a figuring the balance sheet of the US Government.
A next step could be assessing the "off-balance sheet assets":
- the 35% of US corporations can be assessed; they are partly in stock market, partly privately owned.
- individuals earnings power is more tricky I suppose. But surely a figure could be given, just like a stock price is an assessment on a company future earnings.



5. Some additional opinions

- Ron Paul thinks the country is "broke"




- Bill Ackman thinks the US is "solvent"



6. The future of the US Government balance sheet

The years ahead seem to promise:
- growing liabilities,
- decreasing assets, at least for few years, due to reduction of corporate earnings, rich individuals incomes, etc.

A devaluation of the US Dollar, caused by the Federal Reserve creating new dollars, would seem to help the balance sheet by reducing the weight of the liabilities against the assets.



Disclaimer: The material published here is for informational purposes. The author accepts no liability whatsoever for anything related to the post.