Why the US Govt. Balance Sheet Shows is Worse Than You Think

While so much attention is being paid to the growth of the national debt, now at $22 trillion, we should be fair and at least consider what it was to offset that debt: its assets. The latest Treasury report shows that we have assets! However, the assets are not what they appear to be when you dig deeper.

Just a quick explanation for those not familiar with a balance sheet. When you look at a balance sheet of a company, individual, or government there are two parts.

• Assets:
  • The things it owns of value, or 
  • Money that is owed to them
• Liabilities:
  • Money it owes to others, or debt.

Generally, you want lots of assets, and little liability, especially because if you ever need to pay down the debt, you can sell your assets.

And what stands out on the 2018 balance sheet of our dear government, prepared by the Treasury Department themselves, is two things.

1. The Liabilities Outweigh the Assets by 6.6x

While most people are aware of the growing debt, few seem to know anything about its assets. Yes, there are assets, and this is from their report:

But, the interesting part is that the assets may not be much of an asset after all.

When you Realize its Single Largest Asset is Student Loans, You Realize there are Virtually No Reliable Assets

If the government has trillions in assets ($3.8 trillion to be exact), you would at least hope they are good, solvent assets. Let’s take a moment to consider how much of the governments assets are student loans:

As of September 30, 2018, the government’s $3.8 trillion in assets are comprised mostly of net loans receivable ($1.4 trillion) and net property, plant, and equipment (PP&E) ($1.1 trillion).15 From Financial Statement Note 4, The Department of Education’s (Education’s) Federal Direct Student Loan Program accounted for $1.1 trillion (78.6 percent) of total net loans receivable.

Treasury.gov

In summary:

1. Its single largest asset is loans
2. The majority of those loans (almost 4/5ths) are student loans

In case you had not heard,

1. We are in a student loan bubble.
2. Several presidential candidates want to eliminate this debt, including:
   1. Elizabeth Warren is a U.S. Senator from Massachusetts.
   2. Bernie Sanders is a U.S. Senator from Vermont.
   3. Kamala Harris is a U.S. Senator from California.
   4. Tulsi Gabbard is a U.S. Congresswoman from Hawaii.
   5. Cory Booker is a U.S. Senator from New Jersey.
   6. Etc…

Maybe I did not do well at math, but if the govt debt bubble is growing, and it is built on a student loan bubble, then what does that say about our net position? Just remember everytime the govt promises cheaper or free things, like housing back in the early 2000’s, and student loans post 2008, it somehow backfires in large bubbles–I’m not sure why. Actually, you should read my super-bubble articles if you want to see the big picture.

P.S.Debt-to-GDP is Expected to Reach 530% in 75 Years at Current Rates

Or basically and extra $53.8 trillion. And this is probably conservative when you account for the fact that the US economy is highly dependent upon its dominant, yet ever slipping value when you look at its slow erosion of the value of its money.