The official United States deficit for the fiscal year of 2006, according to the federal government, was $248 billion. However, if the U.S. government were to use corporate accounting practices, that number would balloon more than five-fold to $1.3 trillion—essentially hiding (thanks to obscure accounting “rules”) nearly five out of every six dollars of deficit debt from public view.

USA Today reported, “Modern accounting requires that corporations, state governments and local governments count expenses immediately when a transaction occurs, even if the payment will be made later. The federal government does not follow the rule, so promises for Social Security and Medicare don’t show up when the government reports its financial condition” (May 29).

This all translates into bad news for America’s taxpayers and the American economy.

“We’re on an unsustainable path and doing a great disservice to future generations,” says Chris Chocola, a former Republican member of Congress from Indiana. No kidding. The tax liability for each American household is now $516,348. Stack this number on top of what the average U.S. household owes—$112,043 for mortgages, car loans, credit cards and all other debt combined—and it’s hard to find any good news in America’s financial future.

With gilded, gleaming vaults stuffed with ious, America is on the fast track to an economic reckoning. Unless America is willing to stomach some tough economic medicine to cull its massive federal debt—some of which, by the way, is owed to staunch enemies—America could bankrupt itself, or inflict extensive damage to the dollar. By refusing to face reality, America is making this scenario a question of when, not if.

When this happens, a path will be cleared for Europe to take center stage as a global economic power.

In the meantime, there are steps each American can take to help weather the financial storm that looms ever larger on the horizon. Read “Storm-Proof Your Financial House” to learn what those steps are.