Feds break law with “Enron-style” accounting
WASHINGTON – The Enrons of the world are pikers when it comes to sleazy accounting methods. Their sins are chump change compared to the way the federal government is handling your money. Furthermore, no less an authority than Federal Reserve Chairman Alan Greenspan agrees that the feds should change their ways to reflect “a more realistic view” of where taxpayer expenditures stand.
Former congressman Joseph Dio Guardi, a New York Republican, has blown the whistle on a shoddy accounting method he says vastly understates the national debt borne by every U.S. citizen. He says the debt is closer to $20 trillion, rather than the neighborhood of $6 trillion to which it is officially pegged.
Now comes Greenspan to support the “generally accepted accounting principles” (GAAP), which, as the fed boss worded it, “more clearly [lays out] the true costs and benefits of changes to various taxes and outlay programs … [and will] help shift the national dialogue and consensus toward a more realistic view of the limits of our national resources.”
GAAP represents the accrural method of accounting. Though the term “accrual” might prompt a glassy-eyed stare from those of us not schooled in Dio Guardi’s CPA background, its centerpiece comes down to booking expenses incurred, rather than waiting until payments are made.
In his letter to Greenspan agreeing with the fed chairman, the former congressman said the accrural method of accounting in federal government would “rule out clever smoke and mirrors devices that Congress uses to mask economic realities in any given budget areas.”
Dio Guardi cites the Social Security program as but one example of the fiscal train wreck that awaits the country down the line. Indeed, other analysts have said that without Social Security reform, Americans someday could be socked with a tax bill as high as 82 percent of their hard-earned money.
That kind of figure is something every American who pays taxes understands, and is one reason why Dio Guardi, author of the 1992 book “Unaccountable Congress: It Doesn’t Add Up,” tells NewsMax it is short-sighted that anyone would shrug his shoulders and say: “So what? As long as I get my paycheck or Social Security check like clockwork every week or every month, why should I worry about all that accounting stuff?”
Those with that attitude would “want their kids to have the same standard of living that they had,” he told NewsMax. Obviously, anything like an 82 percent tax bill would not be conducive to that. “Putting food on the table” may not be as easy in the future, he said.
What makes the situation worse is that there is in fact a law on the books mandating the so-called “accrural” method of accounting. The problem is that Congress, which calls Enron-type corporations lawbreakers, flouts the law itself.