January 11, 2006

The GAO Speaks Truth to Power

Every year around this time, the US Treasury Department releases its annual "Financial Report of the United States Government," which is supposed to give a sense of our nation's budgetary health. And every year the General Accounting Office (GAO) includes a statement in the report confirming that the Treasury Department's statements are accurate.

This year (as they have for the past eight years), the GAO is withholding judgment. The Treasury's new fiscal year 2005 Financial Report includes a statement from the GAO that pointed to a wide variety of "material deficiencies in financial reporting." The government's inability to accurately measure the flow of funds between different agencies, the incomplete status of tax expenditure reporting (read more here) and the fact that some pretty hefty spending needs are not reflected in the Treasury's fiscal reckoning "[prevent] us from expressing an opinion on the federal government’s consolidated financial statements."

That's about as non-judgmental and dry as you can get in assessing the Bush administration's fiscal policies, but wait: it (gradually) gets better.
The current financial reporting model does not clearly and transparently show the wide range of responsibilities, programs, and activities that may either obligate the federal government to future spending or create an expectation for such spending. Thus, it provides a potentially unrealistic and misleading picture of the federal government’s overall performance, financial condition, and future fiscal outlook. The federal government’s gross debt in the consolidated financial statements was about $8 trillion as of September 30, 2005. This number excludes such items as the gap between the present value of future promised and funded Social Security and Medicare benefits, veterans’ health care, and a range of other liabilities (e.g., federal employee and veteran benefits payable), commitments, and contingencies that the federal government has pledged to support. Including these items, the federal government’s fiscal exposures now total more than $46 trillion, up from about $20 trillion in 2000. This translates into a burden of about $156,000 per American or approximately $375,000 per full-time worker, up from $72,000 and $165,000 respectively, in 2000. These amounts do not include future costs resulting from Hurricane Katrina or the conflicts in Iraq and Afghanistan. Continuing on this unsustainable path will gradually erode, if not suddenly damage, our economy, our standard of living, and ultimately our national security.
Hot stuff. GAO chief David Walker has repeatedly made waves for telling the truth about the fiscal iceberg our ship of state is approaching for a while, as this entertaining article recounts. Walker was appointed as GAO director in 1998, and has a 15-year term-- so he can tell it like it is with no fear of retribution. He-- and the GAO-- are resources we shouldn't take for granted.


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