Washington Admits Fraudulent Accounting Again – WSJ
CBO flags a $66 billion Beltway bamboozlement.
By James Freeman, Aug. 22, 2023 – Excerpts:
You have to laugh or cry when the Congressional Budget Office issues an occasional reminder that lawmakers use bogus accounting to hide from taxpayers the true cost of federal programs. Give CBO credit for honesty as it points out how required official estimates are at odds with real-world bookkeeping. Last week CBO explained how its new report on federal support for consumer and business lending measures the downside:
The report shows two kinds of estimates: those currently used in the federal budget, which are made by following the procedures specified in the Federal Credit Reform Act of 1990 (FCRA), and those referred to as fair-value estimates, which measure the market value of the government’s obligations…
Using FCRA procedures, CBO estimates that new loans and loan guarantees issued in 2024 would cost the federal government $10.9 billion over their lifetime. But using the fair-value approach, CBO estimates that those loans and guarantees would have a lifetime cost of $76.7 billion.
The fair-value estimate is 10 times what Beltway accounting claims!….
A government that habitually embraces such financial shenanigans over decades could someday run up a debt of $32.7 trillion.
Now that someday has arrived, the question is when the reckoning will occur…..
Net interest costs hit 14 percent of tax revenue in July, the level we consider the inflection point for fiscal policy, and, not surprisingly, the bond market has reacted. The next president faces a dour fiscal environment: high deficits despite low unemployment, rising net interest costs, a demographic strain that is pulling forward the insolvency of Social Security, and fewer international buyers of US Treasuries. If that is not enough, all the Trump tax cuts for individuals and the generous Obamacare subsidies expire in 2025….
At near full employment, the budget deficit should be much lower than it is today. A slight increase in unemployment and deficits can balloon quite quickly on top of the interest costs… ultimately Congress will need to act on entitlements like it did in 1983, the last time net interest costs surged.
Perhaps the candidates at this week’s Republican presidential debate will be kind enough to offer plans for serious governing. Reforming entitlements would be a good place to start. The watchdog group Truth in Accounting figures the real federal debt is not $33 trillion but more like $159 trillion if one counts all the unfunded Social Security and Medicare promises.
Swearing off accounting frauds would also be a good place for reformers to start.
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