Is the United States government fiscally sustainable? It's a good question that begs others.Will projected revenues balance liabilities? How does debt figure in? How much will Social Security and Medicare cost? How much will interest on Treasury bills add up to?
Though the financial statements of corporations are required to report unfunded liabilities, the federal government is exempt from any such requirement. The oft-sung $9 trillion debt does not reflect the unfunded liabilities of social insurance programs - programs that many citizens feel the government is obligated to fund.
The Federal Accounting Standards Advisory Board has long wrestled with the question of whether to figure the funding of long-term social insurance obligations into the federal balance sheet. The board has reached no conclusion, but it has released a proposed standard that may satisfy the country's need to know, a draft titled Reporting Comprehensive Long-Term Fiscal Projections for the U.S. Government.
The proposal would add nothing to the federal balance sheet, but the country's Consolidated Financial Report would include detailed information about fiscal sustainability. By presenting a cash-flow perspective, it would reveal that the federal debt isn't $9.6 trillion. It's approaching $57 trillion, according to the Institute for Truth in Accounting, a group dedicated to transparency in government financial reports.
FASAB Chairman Tom Allen said that the project is the biggest that the board has ever undertaken or likely will ever undertake. The proposal would have the nation's CFR convey projected fiscal measurement such as projected receipts, spending, deficits or surpluses, and debt; present the net change from the prior year for certain key projected measures; show how the measurements relate to the overall economy; highlight factors contributing to trends; and report the implications of legislative inaction.
"Ironically, this project got an awful lot of steam as a result of a huge disagreement on the board over how to treat social insurance," Allen explained. "The board has been very divided. The members [from outside the federal government] wanted to show a liability for the promises of Social Security and Medicare. Several other board members did not want to do that, saying that we needed another kind of report. What's important isn't whether we have a liability but whether we can sustain these programs."
A SALUTARY SHOCK
U.S. Representative K. Michael Conaway, R-Texas, said that the country needs the sense of urgency that a sustainability report may inspire. "It can't hurt to get the facts in front of the people," said Conaway, who is a CPA. "That's what this is an attempt to do. It can't hurt to get the facts about the promises that have been made in front of the people ... . We've got over $50 trillion in promises we've made to each other, which my great-grandkids can't afford."
Allen said that a project on reporting social insurance is still on the board's agenda, but for now, it's on the shelf.
Projecting future revenues and obligations in a cash flow model, Allen said, shows that, "This isn't a crisis in the future; it's a crisis now."
Allen said that FASAB cannot agree to put social insurance liabilities on the federal statement because attorneys have advised it that the government has no obligation to continue funding entitlement programs. At any given time, legislation could eliminate the programs.
Allen and a few other board members believe that the government does have such an obligation, but they are a minority on the 10-seat board.
The proposal can be seen at www.fasab.gov.
Comments are requested by Jan. 5, 2009.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access