Not-So Honest Accounting of Government Finances
Happy inauguration day! Today we begin with this little known factoid: For the first 143 years of the American Republic, presidents were inaugurated on March 4, the only day of the year that is also a command.
The date was moved up to Jan. 20 in 1932 when the activist president Franklin Delano Roosevelt couldn’t wait to wring his hands around the neck of the US economy. Roosevelt set in motion 78 years of what the economist Friedrich von Hayek called the “fatal conceit” – the arrogant belief that anyone could know enough at any one time to plan an economy.
Today, we’re paying the price. A little-noticed Treasury report that’s supposed to provide an honest accounting of the government’s finances is now being manipulated just like everything else.
The Financial Report of the United States Government applies generally accepted accounting principles to arrive at a realistic appraisal of the annual deficit. In a typical year, that’s up to twice the official number. But in fiscal 2009, the “real” number is actually lower than the official record-shattering $1.4 trillion.
Statistical watchdog John Williams laments this year’s report reflects “accounting that might be considered questionable if it were used in the private sector. The relatively ‘positive’ 2009 results reflected capitalization of much of the government’s bailout efforts, a late ‘profit’ from TARP, questionable handling of some post-fiscal year liabilities and changes in actuarial assumptions.
So hinky are the numbers, the Government Accountability Office refuses to sign off on the report. In a statement, the acting comptroller general invokes “material” questions of how the Treasury is valuing bailout-related liabilities and assets. In other words, Treasury under Tim Geithner is employing mark-to-make-believe just like the banks he used to oversee when he ran the New York Fed.
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