Posted on 07/17/2002 8:22:17 PM PDT by Libloather
Washington masks deficits using accounting tricks
Tue Jul 16, 5:02 PM ET
Lost in all of the political posturing over a worsening federal deficit and spreading corporate scandals is one ugly fact: The accounting tricks used by U.S. companies are nothing compared with Washington's bookkeeping circus.
Congress and the White House, under both parties, have long played games to exaggerate income, disguise liabilities and cover up troublesome budget realities. As with corporate accounting tricks, the tactics allow lawmakers to hide true financial situations, and their own irresponsible behavior, from ''shareholders.''
Except in this case, they're the taxpayers who foot the bill.
In the government's latest restatement, the Office of Management and Budget acknowledged this past weekend that the deficit for the current year is going to be more than 50% bigger than previously acknowledged: $165 billion instead of the $106 billion optimistically claimed five months ago.
The return to red ink comes after four years of surpluses that were supposed to last indefinitely. And they were sold as the means to pay down the national debt, slash interest costs, boost economic growth and free up money to reform Social Security ( news - web sites) and Medicare.
The surplus is gone, thanks to the costs of the war on terrorism, Congress' inability to restrain spending, the revenue impact of the economic slump and last year's tax cut.
But if the government kept its books the way companies are supposed to, the bottom line would look far worse.
Last year's $127-billion surplus would actually have been a $515-billion deficit. That's because businesses must book expenses as they are incurred, not when payment is made. Thus, Congress wouldn't have been able to hide a $389-billion boost in military retirees' health benefits or other expenses approved last year just because payments were not made immediately.
Washington's other fiscal games are far more blatant. For example, when Congress was desperate last year to justify accelerating the massive tax cut, it simply shifted the date when corporations were required to make a quarterly tax payment. The result was a one-time windfall of $33 billion, heisted from the following year.
Since 1998, administrations have compiled a little-noticed alternative report that tries to reconcile government spending using real-world accounting standards. But the fiscal-watchdog General Accounting Office ( news - web sites) says the bookkeeping is still too shoddy to get an auditor's seal of approval.
The 2001 report shows $17.3 billion in money that simply couldn't be accounted for. That alone is more than the annual revenues of all but the biggest U.S. corporations. And the report doesn't include the future liabilities of the Social Security program, the government's biggest unfunded obligation.
Even under the dubious system Washington uses, budget prospects look dismal. Using rosy assumptions about a bounce back in revenues and restraint in spending, the administration claims to see the deficit dropping to $109 billion next year. But both Republican and Democratic staff experts in Congress are already projecting 2003 deficits in the $190 billion-$200 billion range.
Either scenario requires borrowing money at a cost of billions in additional interest that taxpayers must cover.
Yes, events may have made the return to deficits inevitable. But no accounting shenanigans can disguise the financial irresponsibility that is making it worse.
Making Enron's $600 million restated financial statements look like a mistake in a child's allowance, the U.S. Treasury has admitted an accounting error and a resulting loss of $17.3 billion.
The admission appeared in the 2001 Financial Report of the United States Government issued earlier this spring and accompanied by the statement by the General Accounting Office (GAO) that once again, for the fifth consecutive year, the GAO is "unable to express an opinion on the consolidated financial statements because of certain material weaknesses in internal control and accounting and reporting issues."
Treasury Secretary Paul O'Neill stated in the report, "I believe that the American people deserve the highest standards of accountability and professionalism from their Government and I will not rest until we achieve them."
The report indicates that three factors contributed to the error: inaccurate bookkeeping by government agencies, errors in reporting contracts among government agencies, and timing problems associated with reporting costs and revenues.
For further information: http://www.fms.treas.gov/cfs/01frusg/01frusg.pdf
I hope the attacks they're making on these guys totally backfires on them and people take them to task for their behavior.
Democrats open door, hit face
Hold Senators Chris Dodd and Jon Corzine responsible for their place in this current stock market debacle. They were so anxious to tie Bush to this that they failed to recognize how dirty their own guys are. They're so anxious to paint the GOP as a bunch of rich guys, that they forget that their richest U.S. Senator could buy and sell the richest GOP senator more than 13 times. Here are Roll Call's Senate Richie Riches:
1. John F. Kerry (D-MS) $675 million
2. Jon Corzine (D-NJ) $400 million
3. Herb Kohl (D-WS) $300 million
4. Jay Rockefeller (D-WV) $200 million
5. (tie) Lincoln Chafee (R-RI) $50 million
- Dianne Feinstein (D-CA) $50 million
7. Peter Fitzgerald (R-IL) $40 million
8. Edward Kennedy (D-MS) $30 million
9. Sen. Mark Dayton (D-MN) $20 million
- Sen. Bill Frist (R-TN) $20 million
10. Sen. John Edwards (D-NC) $15 million
- Sen. Maria Cantwell (D-WA) $10 million
The money isn't an indication of guilt, but the facts are. Former Goldman Sachs CEO John Corzine (D-NJ) ran a stock scam, as we cover in Corzine Ran Stock Chophouse. Chris Dodd (D-CT) was the one who relaxed all these accounting standards (See Dodd in Accounting Scam Sandwich.) This lack of regulation, combined with Clinton-era lack of morals and the 1993 Tax Act that encouraged CEOs to inflate stock prices, led to our current scandal.
Open up your books, greedy Senators
I'd like to see the stock transactions for the $675 million of John F. Kerry and his wife Teresa Heinz, the $200 million of Jay Rockefeller or the multimillion-dollar Ted Kennedy. Let's see what kind of shape their portfolios are in. In the spirit of Daschle's rhetoric (though not his actions, since he refuses to release his tax returns so we can see which corporations are paying his wife's million-dollar lobbyist salary), I say, "Let 'em all release their tax returns and their stock transactions."
In the spirit of Henry Waxman, who's demanded that Dick Cheney take all of his Halliburton earnings and give them to ex-employees, I say Corzine and Kerry and Daschle and Cantwell should give the money back. Cheney cashed out of Halliburton at the demand of the Democrats and liberals in this country, did he not? Yes, and the stock was worth $36 million. But guess what? Almost $15 million of that money went to the IRS! That's just federal taxes.
No one ever talks about this, or about how Bush could've doubled his money if he'd held on to his Harken stock for a few weeks. Terry McAuliffe, chairman of the DNC, should give back the $18 million in profit he made off a $100,000 deal with bankrupt Global Crossing. Hillary? She turned $1,000 into nearly $100,000 in a short ten-month period by trading cattle futures. Let the investigations begin, and let's expose the sleaze and hypocrisy that is the Democratic Party today, shall we?
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