Congress’s band of Accountants
Cash accounting is when you base your accounting on actual cash coming in and out. Accrual accounting is when you base your accounting on promises to get money (invoices) and promises to send money (purchase orders).
My software company, while small on the cosmic scale, is by law too big to use cash accounting. So is Exxon, General Electric, and pretty much every other corporation you’ve ever heard of.
What huge entity uses cash accounting? The US Government. Why? They use it to hide promises they’ve made for votes:
While we’ve been warned about the trillion-dollar deficit Mr. Obama is facing, accrual accounting and properly audited numbers from the U.S. Treasury Department would show the deficit last year was $3 trillion, according to this former Rhodes scholar and investment banker. "The U.S. government uses cash accounting," he says. "That is illegal for any enterprise of any size in America except for the U.S. government. Every for-profit business, every not-for-profit business, every state and local government has to use real accounting except for Uncle Sam."
For instance, using accrual accounting the deficit for 2008 was close to 3 trillion dollars. Using accrual accounting the debt and promises made by the US Government add up to $180,000 per person.
As they talk about “stimulus” bear in mind that you are only hearing the tip of the squirrely iceberg.
January 19th, 2009 at 4:08 pm
If we are looking for the root of the national financial problem, look in the mirror. Our politicians do what we demand and tell us what we want to hear about the consequences. Speaking and voting hard truth is a sure ticket to a permanent vacation from the travails of elected office.
Each expensive program had loud advocates that promised a better world at a price we could afford: Medicare, Social Security, Vietnam, Iraq, low taxes, home ownership, safety net, a huge arsenal of weaponry. Which was true in each case, but only if we did none of the others.
The government accounting system is merely a scheme of self-delusion about what we want and what we can afford. If, as a nation, we ever demand we want sanity in our government, the politicians will give it us. But every complainant I ever heard argues for some favored expensive policies and pretends that the holders of the other policies will give up theirs.
We either tackle the problem together or we muddle as long as the lenders will lend us the necessary money. It’s not the politicians that are hard to convince, it’s ourselves.
January 19th, 2009 at 4:25 pm
Our taxes are not low. Mine are quite high. The problem is “us” but the real problem is the system “us” operates in. The 16th Amendment let “us” put our hands in others pockets. The fallacy has grown and almost crushes us now.
What you propose is impossible. Revolution is inevitable. It pains me, but the “greatest” generation and their spawn has done us in.
January 19th, 2009 at 5:07 pm
Low taxes? For who? More than a third of my income goes down a rathole. Last year I overpaid them, and now they say they wont give me my money back. But the still continue to take it out of my check. We need a revolution, armed or otherwise.