Buffett's warning of 'ominous' debt may be understated

From Examiner.com

Buffett noted that fiscally the country is in "uncharted territory," pointing out that the deficit is $1.8 trillion. Buffett commented that the country’s "net debt," the amount held publicly, has climbed to about 56 percent of GDP from 41 percent. After recovery is gained, he urges that Congress must end the rise in the debt-to-GDP ratio and keep the growth in obligations in line with the growth in resources.

Those words are easier said than done.

According to David Walker, former U.S. Comptroller and President and CEO of the Peter G Peterson Foundation, the real national debt is about five times worse than advertised at more than $56 trillion. Between Medicare’s three programs (hospital insurance, outpatient, and prescription drug), current and future promised Medicare benefits are more than $36 trillion.

The larger numbers are calculated using what is known as the accrual method of accounting. The IRS requires companies with sales exceeding $5 million to use the accrual method, but the government is not bound by its own rules and it instead uses the cash method.