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Obama inherited a fiscal disaster. Now what?

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Worse, the Bush administration refused to tell the public about the extraordinary underfunding or overpromising of our major entitlement programs. According to an audited Treasury report, Medicare is $34 trillion in the hole and Social Security is another $13 trillion. We don't even know how to measure Medicaid's problems, but some estimates put the shortfall around $30 trillion. To put this in perspective, the entire fiscal gap for America is at least four times as great as our total annual gross domestic product.

The US Treasury's Financial Report of the US Government is the key document for understanding these problems because it is the only place where Uncle Sam uses real accounting and audited numbers, just as every major company, charity, or state or local government is required to do by law. It is released every Dec. 15, and is available on the Treasury website. Until now, you have probably never heard of the Financial Report.

To its credit, the Obama White House has added a link to the Financial Report on its website, a step the Bush administration never took. The report will tell you that the per capita share of America's total obligations, including entitlements, is more than $184,000 each. The typical American family's share is roughly half a million dollars.

The truth hurts. But the real news is that the 2008 fiscal gap was more than $3 trillion and worsening fast due to our entitlement problems. Hardly any reporter covered this story. And this was before the cost of economic recovery or shoring up our financial system. Including these costs, the 2009 fiscal gap could approach $5 trillion.

Whether due to tradition, inertia, or ignorance, Uncle Sam refuses to weigh himself on an honest scale. It's a decision with serious consequences.

Two leading credit rating agencies on Wall Street, Standard & Poor's and Moody's, projected – while Bush was still president – that the US Treasury bond could lose its AAA rating as soon as 2012. If we allow this projection to come true, the US will have plummeted from the prospect of being debt-free to destroying its credit rating in only eight years.

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