If you look at the historical tables attached to President Barack Obama's latest budget proposal, they say the federal government took in $2.165 trillion in revenues in fiscal 2010 and spent $3.720 trillion, leaving a federal deficit of approximately $1.555 trillion.
This looks like a horror story, of course. Yet the true story is more horrible. To find that story, you have to look at the financial statements quietly posted by the U.S. Treasury on the website of the Financial Management Service. These documents show the actual accounting for the federal government in much the same way your bank statements show the actual accounting for your household.
The Daily Treasury Statement published on Sept. 30, 2010 -- the last day of fiscal year 2010 -- itemized all the revenue the government received in that fiscal year and all the money it spent.
True federal spending for fiscal 2010, the Treasury statement said, was $11.5 trillion ($11,537,305,000,000.00).
Now, how can the White House budget claim federal spending was only $3.720 trillion in fiscal 2010, when the Treasury says it was $11.5 trillion?
The biggest reason is because the spending tables produced by the Office of Management and Budget to accompany the White House budget do not count the money the Treasury is obligated to disburse in any given fiscal year to pay off old Treasury securities -- that is, old loans -- that come due in that year.
In fiscal year 2010, according to the Treasury statement, $7.207 trillion ($7,206,965,000,000.00) in loans came due. Paying off old loans is by far the greatest annual expense the federal government faces.
After the $7.207 trillion the Treasury spent paying off old loans in fiscal 2010, the next two greatest expenses were federal entitlement programs. Treasury spent $571.5 billion paying Social Security benefits, and $513.7 billion paying Medicare benefits. The fourth greatest federal expense was paying defense contractors, who earned $399.1 billion for the year.
So, where did the government find $11.5 trillion to pay its bills?
The vast majority of it did not come from taxes. During fiscal 2010, the government brought in $2.038 trillion ($2,037,686,000,000.00) in tax revenue, including all individual and corporate income taxes, all payroll taxes, all excise taxes, and all estate and gift taxes. At the same time, according to the Treasury, the government paid out about $467.9 billion in tax refunds, leaving net federal tax revenues at about $1.5697 billion. If you also subtract that $467.9 billion in tax refunds from the government's disbursements, that leaves a little over $11 trillion in spending.