America’s Worth: Another Opinion

By Domenic N. Savini, CPA, CMA, MSA

In “What's America Really Worth,” an article published in the September/October 2019 issue of Disclosures magazine, the author does an outstanding job of analyzing the financial position of the United States government and echoes what senior government officials have concluded for quite some time now; that is, due to primarily our nation’s social insurance programs, our government is on an unsustainable fiscal path.

The author correctly concludes by stating that there are no easy answers to our problem and that the American people, working in partnership with our elected representatives, must begin addressing the implications of the government's tenuous position. To that end, I would like to offer a different opinion by shedding light on our nation’s real worth and offer some suggested next steps for our profession to take. 

The federal financial statements do not reflect our nation's worth.

Conflating the government’s finances with national worth1

Although the title of the article was designed to be provocative and somewhat rhetorical, to help elevate what needs to be a national conversation, I would like to make a critical clarification. The (uncontested) cited facts in no way provide a sufficient basis to value our great nation. Nothing could be further from the truth — these financial statements portray the financial operations and position of our government and not the nation as a whole.

The author himself quotes the Government Accountability Office (GAO) statement that, “…it is apparent that these programs are on a fiscally unsustainable path.” (emphasis added) Albeit that these programs comprise roughly two-thirds of all federal budget outlays, they are also expenditures that circulate and stimulate the economy. Therefore, on balance and from an economic point of view, such expenditures can be viewed as an “asset” to the nation. Just ask any retiree how they feel about Social Security and Medicare and think carefully about how these amounts benefit the nation not just now, but also well into the future. Some of these benefits include better health and longevity for seniors, which also directly and indirectly benefit our nation because people who are healthier and live longer not only may decide to work more but also spend more time contributing to society such as volunteering; and sustaining a significant portion of our medical and health care industries. As of 2018, more than 16 million people work in the health care sector, accounting for 11 percent of all jobs in the overall economy.2  

Conflating financial position with financial condition 

Financial position and financial condition are two separate and distinct concepts, each requiring their own distinct analyses — especially in the case of a nation’s financial condition, which cannot be limited to financial or accrual accounting. Indicators of financial position, measured on an accrual basis, are just the starting point for reporting on financial condition and must be supplemented in a variety of ways. This is because financial condition is a broader and more forward-looking concept than that of financial position. Reporting on financial condition requires financial and nonfinancial information about the national economy and society, as well as the government itself, and could also include comparisons and relationships (such as trade balances and balance of payments information) with other developed economies.3  

Financial statements have inherent limitations

General purpose financial reporting has limitations, and in many cases users need to consult other information sources to satisfy their needs. Moreover, the Federal Accounting Standards Advisory Board (FASAB) noted that it may be necessary at times to combine nonfinancial information with reported financial information to satisfy users. In part, federal financial reporting is designed to assist the public in assessing the impact that government operations have on the nation’s financial condition and not serve as a proxy for a nation’s wealth or worth. Lastly, to the extent financial statements or the reporting model they are predicated on are bounded, it stands to reason that any resultant analyses, especially those which are forward-looking, must be meticulously corroborated before reaching any conclusion.3 

So, what really measures a nation's worth?

The article’s subtitle states that, “The United States is generally considered the richest country in the world. But our financial statements reveal a more sobering fiscal reality,” which begs the question: How could these persons consider us to be the “richest country in the world” in light of our federal financial statements? The simple answer is that they know the financial statements of our government alone are not truly reflective of our national wealth. 

As a sovereign nation, the United States controls its money supply through monetary policy and controls its ability to tax through fiscal policy. Simply put, our government can print and tax money at will. However unpopular to some, these powers give the government a call on the underlying wealth of the United States and its citizens and could arguably be reflected as assets equal to our liabilities and/or obligations on our federal balance sheet. 

Therefore, although the financial position of the United States as depicted by the current reporting model does in fact reveal structural problems, we must (1) understand that not all sovereign powers (or other resources, for that matter, such as the nation’s mineral estate) are reflected as assets on the government’s balance sheet, (2) realize that not all liabilities and obligations come due at a single point in time, and (3) consider other nonfinancial information (for example, economic, demographic and regional metrics and statistics) before our profession can enter into an intellectually honest discourse about how best to solve our fiscal problems. 

For example, two very key nonfinancial (performance) indicators that should be considered in analyzing our nation’s worth are Gross Domestic Product and 10-Year Treasury Yields.

Gross Domestic Product (GDP)

For example, reporting Gross Domestic Product (GDP) would help users gauge an economy’s overall size and health because GDP measures the total market value of all U.S. domestic goods and services produced in a given year. Moreover, GDP trend information also tells us whether the economy is expanding (producing more goods and services) or contracting (producing less output). Lastly, it also tells us how a nation performs relative to other economies around the world.4   

10-Year Treasury Yields

One only needs to acknowledge that the United States’ treasuries are considered the world’s safe haven to understand that compared to other nations, investors see value in buying U.S. securities that are backed by the full faith and credit of our great nation. As a result, these treasuries enjoy an extremely low but positive yield, mostly due to the fact that virtually no credit risk exists for investors. Underscoring its importance, the 10-year yield is used as a proxy for mortgage rates and other measures and is a sign of investor sentiment about the economy. Keep in mind that a lower (rising) yield generally indicates increased (falling) demand for treasuries, which means investors would rather put their money in U.S. securities as opposed to other non-U.S. government investments.5

Now, if we want to truly know the “worth” of our country, we have to look well beyond the current financial reporting model and the two key indicators noted above. This requires coordination with other disciplines and professions, such as economists and monetary or central banking system experts. Obviously, this would include analyzing key nonfinancial information, but our accounting profession is well-poised to do this and should take the lead. 

Now What? Calls to Action

CPAs can help identify solutions instead of problems 

It is unlikely that the political parties will come together in a bipartisan manner given today’s highly polarized political environment. Nonetheless, the CPA profession, which is highly trusted by both sides of the aisle, can help educate and influence individual elected officials by encouraging them to seek bipartisan solutions.  

However, before we can attempt this, we must become educated ourselves in highly complex topics like economic theories (e.g., aggregate supply versus aggregate demand) and monetary policies (e.g., primary and secondary market operations). To this end, I recommend the VSCPA take the lead and spearhead a much needed and long overdue discussion.

Figure 1 illustrates a draft framework wherein we accountants begin communicating with economists and monetary policy experts to get their viewpoints concerning our nation’s financial condition. The most important objective would be to develop alternative structural program changes and funding options for our social insurance programs. The overall goal would be to share these alternative solutions with the public and our elected officials so that our government’s fiscal policies can be changed in a manner supportive of our economic well-being while also being inter-generationally sustainable.   

Expand financial reporting to include nonfinancial information

Additional nonfinancial information (indicators) that could be included in federal financial statements relate mostly to the conditions and factors that drive GDP as well as the demand for U.S. treasuries. They can also be viewed as areas for both the public and private sectors to focus on sustaining and further developing. For example, according to economic theory, a nation’s productive capacity is central to its potential economic output and depends upon the following:

1. Size or quantity of the labor workforce: Number of working age people reflecting those in society who are economically active. 
2. Productivity of the labor workforce: Output per worker reflecting the successful leverage of education, skills, motivation and technology.
3. Capital infrastructure: Amount of capital that can be used in the productive process. Capital includes investments in property, plant and equipment and is important for determining long-run economic growth.
4. Raw materials: Amount of natural resources such as oil, coal, natural gas, etc., reflecting a nation’s ability to sustain itself and potential sources of revenue.
5. Entrepreneur potential: Willingness and ability of individuals to take risks by setting up new businesses and developing new products and ideas. Entrepreneurs help drive an economy, create jobs and foster innovation and efficiencies.
6. State of technology: Technological innovations determine the productivity of labor and capital and demonstrate the ability of firms to automate productive capacity.
7. Law and order: Crime rates can have an influence on productive capacity. High crime rates will discourage firms from investing and may hold back productive capacity.
8. Corruption: Corruption often burdens businesses with uncertainty and extra costs dissuading investments and risk taking.
9. Political and judicial stability: Uncertainty from civil conflict or lack of political and/or judicial stability can lead to economic stagnation or decline.
10. Tax collection and public sector investment: Efficient and fair tax collection reflecting a broad base of government revenue enables the government to invest in public services such as health care, education, transportation and defense. 

Each of these indicators contribute to long-run economic growth and, at a minimum, several should be reported so they can be continually monitored and assessed alongside reported financial statements.

The United States is the envy of the world when it comes to our capital markets and system of jurisprudence. People come here from all over the globe to work and invest their hard-earned money because they know there's no other place on this planet where they have such an opportunity to live and prosper. 

In spite of what some in the media report, we have a solid brand — The United States of America. Were it not so, we would not have foreign countries trying to influence our policies more than ever, as well as so many people clamoring to come through our borders — risking their very lives and leaving behind everything they treasure. Our values of liberty, freedom and justice for all are reflective of our goodwill [which is, by the way, another (intangible) asset not currently recognized in the federal financial statements]. 

Only by engaging in a discussion with other professions can we as an accounting community refine our understanding of the complex federal financial and economic environment that we find ourselves in today. It is time for our profession to build upon the fine work of VSCPA members like Tom Visotsky, CPA, and Edward Mazur, CPA, in order to elevate the conversation. We should waste no time and begin working with other professions and disciplines in an apolitical way to begin identifying and recommending practical solutions to the government’s fiscal problems.

As a last word, a common sentiment among many people around the world is that whether or not they agree with our U.S. policies, they know one thing for sure, the way the U.S. goes so goes the world. Let’s lead by example and show the world how much we are “really worth.”  

Domenic N. Savini, CPA, CMA, MSA, is an assistant director at the Federal Accounting Standards Advisory Board (FASAB) where he primarily serves in the area of infrastructure, addressing such issues as deferred maintenance and repairs, asset impairment and public-private partnerships. He is founder and chief executive of EthicQuest, LLC. Contact him at or find him on LinkedIn.

1. In “The Wealth of Nations,” Adam Smith argues that the accumulation of “gold and silver” (a financial measure) is not evidence of true wealth. Instead, he posits that a nation’s wealth is really the stream of goods and services that it creates; today we would call this “gross national product (an economic measure).” Smith believes that to maximize gross national product, a nation’s productive capacity should not be restricted but set free.

2. https://www.healthleadersmedia.com/strategy/healthcare-job-growth-outpaced-nearly-every-other-sector-2018

3. Statement of Federal Financial Accounting Concepts 1: Objectives of Federal Financial Reporting

4. https://www.stlouisfed.org/open-vault/2019/march/what-is-gdp-why-important

5. https://www.investopedia.com/articles/investing/100814/why-10-year-us-treasury-rates-matter.asp