Budget Matters

Three trillion bucks in the 2009 federal budget. That’s a shitload of money. One thousand billion which itself is one thousand million. A veritable cascade of legal tender, all going somewhere. We know the big ticket items: Social Security, Medicare, national security, interest on the debt. The rest of the federal budget seems to be a labyrinth of departments, programs and activities but otherwise obscured in this tide of money. All this set me to wondering exactly what and how the federal government spends its money so I spent some time looking at the numbers and then writing about it. Clearly, I am a sick man.

Finding detail took a little surfing but I found it pretty quickly. The least useful sites were the White House and the Office of Management and Budget. What I found there was mostly bullshit. Eventually, I came to the US Treasury Financial Management Service website and located the federal government financial statements. This is the bottom line–no projections, no rosy assumptions, no fiscal legerdemain–what the US government spent. The real numbers.

Well, okay...about as real as can be. This is, after all, the federal government. The Comptroller General of the United States cannot render an opinion about the financial statements. (This is Not Good, for those of you not familiar with audit language). He cannot attest to their accuracy and reliability for a variety of reasons, largely due to inadequacies in five departments, including Defense, and other problems. The Comptroller General notes that this is the 11th consecutive year that the federal financial statements did not meet generally accepted standards. In short, the federal government cannot do what is required of virtually every other entity responsible for collecting and disbursing significant funds in this country and, probably, the world.

The Comptroller General's words:

While significant progress has been made in improving financial management since the U.S. government began preparing consolidated financial statements 11 years ago, three major impediments continue to prevent us from rendering an opinion on the accrual basis consolidated financial statements: (1) serious financial management problems at the Department of Defense, (2) the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies, and (3) the federal government’s ineffective process for preparing the consolidated financial statements. Until the problems outlined in our audit report are adequately addressed, they will continue to have adverse implications for the federal government and American taxpayers.

Americans cannot rely on the numbers, especially at Defense, so ensuring real transparency in government is a ways off yet. Even the good news is mixed. Improvements in determining future liabilities for social insurance (Social Security, Medicare, etc) is much improved but it shows a humongous deficit that is cause for real concern. And while the numbers are not exactly reliable, they are sufficient for broad analytical purposes. The Comptroller General does this by reporting the trend in federal fiscal exposures.

Considering this projected gap in social insurance, in addition to reported liabilities (e.g., debt held by the public and federal employee and veterans benefits payable) and other implicit commitments and contingencies that the federal government has pledged to support, the federal government’s fiscal exposures totaled approximately $53 trillion as of September 30, 2007, up more than $2 trillion from September 30, 2006, and an increase of more than $32 trillion from about $20 trillion as of September 30, 2000. This translates into a current burden of about $175,000 per American or approximately $455,000 per American household.

If I figure correctly, the exposure has increased by 60 percent during CheneyBush’s tenure. That and endless war are his legacies. Way to fucking go, America. And some of you STILL think he's been a good steward of the public weal?

All this was occasioned by the FY 2009 budget released yesterday. See "bullshit" above. I don’t put much faith in budgets. I think actual spending is much more informative since that’s what happened (assuming I’m not looking at unreliable federal data). “Follow the money,” Deep Throat said. Or not. Either way, it’s good advice. The money never lies; the people who count, spend and report the money lie but not the numbers.

I look at all this and wonder about the future. The numbers don’t look good. That’s why the Comptroller General has joined with a somewhat bi-partisan coalition (mostly center-right) groups in conducting a “Fiscal Wake Up Tour” to alert Americans to the fiscal implications of current policies. I’ve seen David Walker, the Comptroller General give this presentation as well as another presenter. I’ve also heard the Fiscal Wake-Up dismissed as a conservative plot to further reduce government. Given the lack of progressive organizations that is plausible but at this stage, the Wake Up is simply calling attention to the discrepancy between obligations and resources to meet them. It’s just the numbers

My take is that a wake-up is seriously called for. I don’t doubt the numbers, they are neither conservative nor liberal. GAO's confidence in the Statement of Social Insurance, which is largely reasoned projection, adds credibility. I don’t think waking up to fiscal reality necessarily means we eliminate social insurance or other public programs that contribute to economic security for all. Americans do need to ask how we will sustain the society that we have created with our promises. Young Americans should have a future that offers opportunity rather than saddling them with a huge national debt, the costs of an aging generation and a deteriorating physical and social infrastructure. I believe that the generations now in power and now coming into power have a duty not to leave their successors with an “...imprudent and unsustainable long-term fiscal path that is getting worse with the passage of time” as the Comptroller General so directly states it. The sooner we start talking about the real challenges to our future, the sooner this nation will have a future to offer. I don’t see or hear any or the remaining presidential candidates really addressing those long term issues.

That's why I understand what Jim Yeager wrote the other day at Mockingbird's Medley. It is a long post that I would describe as the “hopelessness of a thinking person”, the excruciating position of seeing American democracy simply degenerating into sheer meaninglessness. Because he pays attention, Jim not only sees the degeneration and its implications but, unlike most Americans, he understands how irrelevant modern politics is to this loss.

Even the NYT knows this, pointing out that CheneyBush’s 2009 budget leaves all the contradictions and problems in place. The story blames politicians for doing what politicians do naturally–make promises and minimize problems–and it also blames voters who will defeat anyone who faces up to “long-run fiscal challenges...It’s not what voters want to hear.” The story is right about the inadequacy of candidates’ supposed solutions but I think it underestimates voters’ intelligence. I think that the US can address the fiscal contradictions at a reasonable level of taxation by examining the fundamental nature of our economy and its relationship to the world economy. We are a nation of polarized wealth, a massive military-industrial economy, served by a deteriorating public infrastructure, a dysfunctional health care system. Still, America is a rich, rich nation with a history of innovation and accomplishment. It’s not like we have nothing to work with, like many nations.

I would like to see a candidate who can rise to this occasion. That would be a difference worth voting for. I don’t see that candidate yet.

Sigh.


addendum

This post got way too long to incorporate language from the Comptroller General’s December 10, 2007 transmittal letter. If a company got this kind of audit report, it’s stock would tank. That’s why companies work so hard–in both legitimate compliance efforts and pressure on the people they pay to produce audits–to ensure they don’t get bad audit reports like this. I’ve never seen one so brutally direct about deficiencies. Read the first two pages or so then read the section headings and the first sentence of those sections. You’ll get the idea even if you don’t speak accountant.

It's good that we can better see what we are doing with our public resources even if that knowledge is unsettling. The reports show that most federal agencies can actually produce reliable financial statements these days. A decade ago, the federal government couldn’t even produce basic financial statements at any level. Now it can. Almost. And the numbers are squishy. This information didn’t even exist before.

If I have good informationI can talk honestly and knowledgeably. That's my opening bid for any dialog about public policy and resource allocation.