Federal Deficit Under-Reported Says White House

The federal budget deficit was $162.8 billion when it was reported two months ago. However, the Bush administration says that the total for the fiscal year, which ended September 30, 2007, would have been $275.5 billion if Uncle Sam had to do his accounts the same way private companies do.

The US government uses a cash-flow system to keep track of its books. In the private sector, the CFO usually uses the accrual method of accounting. Under that system, the green-shade brigade has to book costs when they are incurred not when they are paid. That makes things like health insurance more expensive on the ledger.

A decade ago, Congress passed a law requiring the government to use the accrual method to provide some transparency by holding it to the same standards as a company. That intention has yet to be fully realized. The Government Accountability Office, Congress' auditing arm, refused to sign off on the books (in fact, it has refused to sign off every year). The Associated Press reported this was because some agencies had accounting trouble – especially the Department of Defense.

GAO Comptroller General David M. Walker wrote in a letter to Congress, “The federal government did not maintain effective internal control over financial reporting, including safeguarding assets, and compliance with significant laws and regulations.” Thus the GAO wasn’t accepting the report.

Interestingly, the GAO did sign off on the financial statements for both Social Security and for Medicare. The "Financial Report of the United States Government" for 2007 says that those two programs will run $45 trillion short in paying projected benefits over the next 75 years. Maybe the GAO can see 75 years ahead, and maybe not. However, at least those two programs have numbers one can believe, and so make rational policy. And then, there’s defense.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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