Sleight-of-Hand Math for the Budget Deficit
By Allan Sloan
Washington Post
Don't believe the hype: The deficit is much bigger than you think.
There will be lots of celebrating in Washington next month when the Treasury announces that the federal budget deficit for fiscal 2007, which ends Sept. 30, will have dropped to a mere $158 billion, give or take a few bucks. That will be $90 billion below the reported 2006 deficit, and will be toasted by the White House and Treasury as a great accomplishment.
But I have a nasty little secret for you, folks: If you use realistic numbers rather than what I call WAAP -- Washington accepted accounting principles -- the real federal deficit for this fiscal year is more than 2 1/2 times the stated deficit.
Why am I inflicting this information on you? Because there's been so much joyous noise about the budget emanating from Washington, despite the subprime mess and market meltdowns, which don't bode particularly well for future tax collections, that my natural contrarianism makes me feel like bombing the buzz machine. In addition, so many investors (and speculators) are fleeing to the supposed safe haven of Treasury securities lately that it's a good time to take a look at what's really going on with the federal budget.
If a publicly traded corporation tried keeping books the WAAP way rather than the GAAP (generally accepted accounting principles) way, its auditors would be on the phone to the Securities and Exchange Commission before you could say Sarbanes-Oxley. But this is the federal government, which operates its unique budget accounting system regardless of which party's running the show. Making the deficit look smaller than it really is helps whoever's in power, be it today's borrow-and-spend crew or yesteryear's tax-and-spenders.
(Continued here.)
Washington Post
Don't believe the hype: The deficit is much bigger than you think.
There will be lots of celebrating in Washington next month when the Treasury announces that the federal budget deficit for fiscal 2007, which ends Sept. 30, will have dropped to a mere $158 billion, give or take a few bucks. That will be $90 billion below the reported 2006 deficit, and will be toasted by the White House and Treasury as a great accomplishment.
But I have a nasty little secret for you, folks: If you use realistic numbers rather than what I call WAAP -- Washington accepted accounting principles -- the real federal deficit for this fiscal year is more than 2 1/2 times the stated deficit.
Why am I inflicting this information on you? Because there's been so much joyous noise about the budget emanating from Washington, despite the subprime mess and market meltdowns, which don't bode particularly well for future tax collections, that my natural contrarianism makes me feel like bombing the buzz machine. In addition, so many investors (and speculators) are fleeing to the supposed safe haven of Treasury securities lately that it's a good time to take a look at what's really going on with the federal budget.
If a publicly traded corporation tried keeping books the WAAP way rather than the GAAP (generally accepted accounting principles) way, its auditors would be on the phone to the Securities and Exchange Commission before you could say Sarbanes-Oxley. But this is the federal government, which operates its unique budget accounting system regardless of which party's running the show. Making the deficit look smaller than it really is helps whoever's in power, be it today's borrow-and-spend crew or yesteryear's tax-and-spenders.
(Continued here.)
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