USA Inc: Unfunded Liabilities Threaten Cash Flow

[Stocks-to-Watch]

Former Morgan Stanley technology analyst Mary Meeker, who left the Street last year to join the venture capital firm Kleiner Perkins Caufield and Byers, today unleashed a 266-page PDF document containing 460 PowerPoint slides that aims to “start a discussion” about the state of the U.S.’s financial condition.

It is titled U.S.A Inc: A Basic Summary Of America’s Financial Statements.

You can grab a copy of it here.

It features a gold-plated introduction by five very serious people, who collectively praise the work that Meeker has accomplished: George P. Shultz, Paul Volcker, Michael Bloomberg, Richard Ravitch and venture capitalist John Doerr, who is an old hand at Kleiner Perkins.

Doerr last week hosted a dinner for President Obama in Silicon Valley, but I’m unaware of whether he provided the Prez with a copy of the document in advance.

As the title would imply, Meeker’s conceit is to look at the U.S. as a corporation:

Imagine for a moment that the United States government is a public corporation. Imagine that its management structure, fiscal performance, and budget are all up for review. Now imagine that you’re a shareholder in USA Inc. How do you feel about your investment?

So, how’re we doing? Decent 4% net income margin over the last 15 years, but negative operating cash flow of $1.3 trillion last fiscal year, and a negative net worth of roughly $45 trillion.

The main culprit, writes Meeker, are the unfunded obligations — Medicare, etc. Without offering A prescriptive, Meeker asks, “How would a turnaround expert determine ‘normal’ revenue and expenses?” and she goes on to identify various corporate restructuring initiatives that could be considered, including slimming down entitlements and trying to boost GDP.

I would note that as there’s no cash flow statement per se in the document, it’s not entirely clear how to classify the payout ratio to we shareholders: do entitlements actually constitute a form of returning value to shareholders for which we’re all grateful?



Original Article Source by Barrons.com