From the FT,
"A truer measure of America's ballooning deficit
The federal government keeps two sets of books, but the Bush administration only wants you to see one of them. There is the highly publicised "President's Budget" issued by the Office of Management and Budget, and the almost-secret "Financial Report of the United States" issued by the Department of Treasury. The budget says that the 2005 US fiscal deficit was $319bn, but the Financial Report claims it is $760bn.
Which view is correct? Is the deficit a mere 2.6 per cent of gross domestic product and shrinking, as the former OMB director and now White House chief of staff Joshua Bolten claims, or an alarming 6.2 per cent of GDP and growing, as John Snow, Treasury secretary, writes in the Financial Report?"
By Jim Cooper,
a Democratic congressman from Tennessee and a fiscal conservative
Basically the current figures are calculated using
CASH ACCOUNTING.. ie. the US govt counts the dollars spent by its agencies and earned from its taxpayers. The argument is that
ACCRUAL ACCOUNTING should be used.. ie. measure the debts incurred before interest or principal must be paid. Or to put it another way, using yourself as an example.. include your credit card debt, mortgage, etc. in your personal accounting.. if you don't do this then you look much more wealthier than you really are.. right?
Further from the article, "The budget says Americans' personal share of the national debt is $28,000; the report says it is $156,000. That means a family of five owes roughly $750,000. As David walker, US comptroller-general, says, you owe the equivalent of a luxury home, only you do not get to live in it. You only get the mortgage" - or in fact, your children, childrens' children, etc. get to pay it off.
The debt burden's grows at a rapidly increasing rate, doubling in the last 5 years. And it doesnt include Medicare and Social Security obligations.. ouch.
Cash accounting has not been used in the business world for a while.
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