"The Most Expensive Credit Card in the World"
By now, you’ve probably filed your 1996 tax return and made your final payment on the balance due. What you probably don’t realize, however, is that you paid only part of your current balance. The U.S. Government does not bill you for your part of the nation’s deficit; it leaves that to the next generation.
How does the government get away with it? Simple: It doesn't bill you for the real cost of government now, thereby pushing our annual accumulated excess spending (the national debt) onto tomorrow's taxpayers - our children and grandchildren.
As a CPA and former member of Congress, I believe that every citizen has the right to know the real cost of government. But the U.S. government is not required to keep track of its finances and report to taxpayers the way publicly traded corporations are (under the Securities and Exchange Act of 1933). While everyone talks about the national debt, the cash basis of accounting used by the federal government allows elected officials, wittingly or unwittingly, to disguise its real magnitude.
The national debt, as currently defined by government accountants, is the amount the U.S. government owes to those who hold treasury notes, bills and bonds. In 1969, the national debt was $365.8 billion. By the end of fiscal 1996, it was $5.2 trillion. Even allowing for the depreciation of the dollar between 1969 and 1996, the national debt has more than doubled. This sum does not include unrecorded liabilities that our government will have to pay in the future, including unfunded liabilities for Social Security, Medicare, military and civil service pensions, and government guarantees, which would easily triple the national debt. In fiscal 1996, it took $340 billion just to cover the interest on the $5.2 trillion shown on the federal government's books.
Although the Second Liberty Bond Act put a ceiling on the total federal debt, elected officials have voted to raise that limit almost every year. With congressional approval, the debt limit was increased by $600 billion at the end of 1995, bringing the new debt limit to $5.5 trillion. The 435 members of the House of Representatives did this by sliding a plastic voting card through a slot. I once had one of these cards, which I dubbed in my 1992 book, Unaccountable Congress: It Doesn't Add Up, "the most expensive credit card in the world."
Imagine having a credit card with an unlimited credit line and no expiration date. The balance on the card is billed not to you, but to future generations. Although the federal government does not bill taxpayers the way that MasterCard and VISA do, I have put the annual budget of the United States in the form of a credit card statement to show you how government spending affects each of us as taxpayers. Note that there was a large previous balance due of $43,252.03. This is your share of Congress' past spending, which was covered by borrowing in your name, not by revenues.
You will see a number of items that elected representatives bought (i.e., appropriated) on your behalf during the past year - Social Security, defense, health and so forth. Your share of these expenditures was $11,854.30. Added to the previous balance, this brings your account charges to $55,106.3 3. But you did make some payments on your balance during the year, through your income taxes, payroll taxes and so on. These payments reduced your balance by $12,632.72.
Finally, I must remind you that even Uncle Sam cannot borrow other people's money interest free. So you also have to pay a "finance charge" on his borrowing, amounting to $2,959.54. This is your share of the interest on our national debt. Adding this gives you a new balance due of $45,433.14 - an increase of $2,181.11 over last year's balance due.
When your credit card company notices that you have reached your credit limit, it lets you know that you are at the end of the line. Not so with Congress. The plastic cards that representatives use to vote on spending and taxing bills has no effective limit. There is a theoretical limit, however; it's called the debt ceiling. But, as I said before, the amazing thing about the congressional credit card is that it can also be used to raise the debt limit. Every time Congress' deficit spending runs up against the current debt limit, a majority of the members simply stick their little plastic cards into a computer terminal at the end of each row of seats on the House floor. If the Senate and president concur, the nation's debt limit is increased. (I doubt your private credit card company is planning to introduce this feature.) Except for the fact that your children and grandchildren will pay through the nose for Congress' use of this voting (read, "credit card, it is a real boon - at least to Congress and the administration, because it makes it possible for them to keep passing the buck (really the bill) on to the next generation.
If you want to do something about it, I suggest you join me in urging elected officials in Congress to use their cards responsibly. Ask them to take a pledge of fiscal responsibility and implement the following "truth in government" spending program:
• A balanced budget each year.
• Accrual or liability accounting in place of cash accounting to show the real bottom line and debt each year.
• Real congressional budget reform, including redefinition of the budget into general, trust fund and enterprise accounts, and a biennial budget cycle.
• Capital budgeting to account properly for the acquisition and utilization of fixed assets, such as buildings and equipment.
• Audits of federal operations and finances by independent CPAs.
• Understandable annual financial statements for the federal government, mailed to all taxpayers.
It is our right to demand fiscal responsibility, honest accounting, clear reporting and full disclosure from elected officials. It is also our right as citizens to use the voting booth to take the most expensive credit card in the world away from those members of Congress who continue to abuse us and succeeding generations with what has become the fiscal equivalent of a massive pyramid scheme. Personally, I think moving election day to April 15 is an excellent place to start.
This Article was Originally Published in Today's CPA