Congress' fuzzy math

In a prior post, I lambasted Congress from ignoring economic reality in their quest to trade political expediency for sound policy. I am about to do it again, after reading this USA Today article:

The federal government keeps two sets of books.

The set the government promotes to the public has a healthier bottom line: a $318 billion deficit in 2005.

The set the government doesn't talk about is the audited financial statement produced by the government's accountants following standard accounting rules. It reports a more ominous financial picture: a $760 billion deficit for 2005. If Social Security and Medicare were included — as the board that sets accounting rules is considering — the federal deficit would have been $3.5 trillion.

Congress has written its own accounting rules — which would be illegal for a corporation to use because they ignore important costs such as the growing expense of retirement benefits for civil servants and military personnel.

Enron, Global Crossing, Worldcom, and others had people go to jail for doing stuff like this. But Congress? Nah..."good enough for me, but not for thee!" Continuing:

A growing number of Congress members and accounting experts say it's time for Congress to start using the audited financial statement when it makes budget decisions. They say accurate accounting would force Congress to show more restraint before approving popular measures to boost spending or cut taxes.

“We're a bottom-line culture, and we've been hiding the bottom line from the American people,” says Rep. Jim Cooper, D-Tenn., a former investment banker. “It's not fair to them, and it's delusional on our part.”

It's sad that it takes a Democrat, which has historically been the party of fiscal irresponsibility (to support their bloated nanny state), to make this correct observation. Granted, his motives are more likely related to politically embarrassing the president and the GOP. However, his advice is still common sense, which is why...

The House of Representatives supported Cooper's proposal this year to ask the president to include the audited numbers in his budgets, but the Senate did not consider the measure.

No surprise there. The Senate is chock full of presidential wannabes from both parties, and they don't want their fiscal failures accentuated. Nothing to see here, move along...

The audited financial statement — prepared by the Treasury Department — reveals a federal government in far worse financial shape than official budget reports indicate, a USA TODAY analysis found. The government has run a deficit of $2.9 trillion since 1997, according to the audited number. The official deficit since then is just $729 billion. The difference is equal to an entire year's worth of federal spending.

Congress and the president are able to report a lower deficit mostly because they don't count the growing burden of future pensions and medical care for federal retirees and military personnel. These obligations are so large and are growing so fast that budget surpluses of the late 1990s actually were deficits when the costs are included.

The Clinton administration reported a surplus of $559 billion in its final four budget years. The audited numbers showed a deficit of $484 billion.

Clinton never had a surplus? For those of us with a modicum of economic common sense, we've known that and have said that all along. Clinton, Bush, and many other spinmeisters and MSM mouthpieces have touted this mythical "surplus" for nearly a decade. The fact, now irrefutable as a result of this exposé, is that the books were cooked in the 1990's just as they are today. Granted, the spending today is light years ahead of what it was in the 90's, but deficits existed nonetheless...regardless of what Clintonistas tell you.

In addition, neither of these figures counts the financial deterioration in Social Security or Medicare. Including these retirement programs in the bottom line, as proposed by a board that oversees accounting methods used by the federal government, would show the government running annual deficits of trillions of dollars.

The Bush administration opposes including Social Security and Medicare in the audited deficit. Its reason: Congress can cancel or cut the retirement programs at any time, so they should not be considered a government liability for accounting purposes.

Congress...cutting ANY program, much less Social Security and Medicare? Pardon me for just a second here, my friends...

BWAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAAHA! (sniffle...chuckle...snort...)

OK, I'm back. Sorry about that. I tend to crack up reading about politicians promising to cut programs. I've been hearing it since the 1994 GOP revolution (Dept. of Education, Natl. Endowment of the Arts, PBS, NPR, etc.), and it hasn't happened. The exact opposite has happened.

There's more in this story about the different accounting methods and practices that the feds use and that corporations are forced to use by the same government that ignores the practices and methods for themselves. I think the closing paragraph sums up the situation nicely, though:

Rep. Mike Conaway, R-Texas, a certified public accountant, says the numbers reported under accrual accounting give an accurate picture of the government's condition. “An old photographer's adage says, ‘If you want a prettier picture, bring me a prettier face,' ” he says.

Right now, the country's fiscal picture doesn't have an Angelina Jolie face...it's got a Billybob Thornton face!

UPDATE (8/4/2006 - 11:00 a.m.): "Apple May Restate Results Amid Probe", the headline reads. I think Steve Jobs should argue that "If bizarre accounting methods are good enough for those bedwetting bloviating handwringers on the Hill who have the temerity to tell us how we should balance our books, then those same methods should be good enough for us, too! Now, if you'll excuse me, I've got more evil corporate profiteering to do, so buzz off."