Imagine that Uncle Sam suddenly morphed into Samuel Smith, CEO of Federal Enterprises, Inc., a conglomerate with 2.8 million employees in 2009, $2.2 trillion in revenues in 2010, and a proposed budget of $3.7 trillion for 2012. If this private company were run the way Washington works, newspaper headlines soon would scream: “MR. SMITH GOES TO ATTICA.”
Washington’s routine accounting methods would trigger indictments against similarly behaved business executives. In fact, people have been convicted for operating as Washington has for decades.
• Consider the Obama administration and the previous Democratic Congress’s mishandling of $500 billion in Medicare funds. If Republicans proposed to reduce Medicare’s cotton-ball budget by 1 percent, Democrats would scream, “Dachau!” And yet Democrats, of all people, swiped half a trillion dollars from Medicare to finance Obamacare. Democrats also claim that this sum will underwrite Medicare benefits. Which is it?
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Rep. John Shimkus (R., Ill.) grilled Health and Human Services secretary Kathleen Sebelius about this before the House Energy and Commerce Subcommittee on Health. He wondered how, in essence, the Obama administration could move $500 billion from its left pocket (Medicare) to its far-left pocket (Obamacare) and somehow finance $1 trillion worth of Medicare and Obamacare.
“Your law cuts $500 billion in Medicare,” Shimkus reminded Sebelius at a March 3 hearing. “Then you’re also using the same $500 billion to say you’re funding health-care [reform]. Your own actuary says you can’t do both.”
“So,” the eight-term congressman continued, “are you using it [the $500 billion] to save Medicare, or are you using it to fund health-care reform? Which one?”
Secretary Sebelius confessed: “Both.”
“So, you’re double-counting,” Shimkus replied.
“The same dollar can’t be used twice,” observed Health Subcommittee chairman Rep. Joe Pitts (R., Pa.). “This is the largest of the many budget gimmicks Democrats used to claim Obamacare would reduce the deficit.”
As any college business major knows, such double counting would earn a big, fat F on an accounting final. Far worse, this is illegal.
This Medicare flim-flam parallels WorldCom’s doublecounting of revenues, among the defunct telecommunications company’s $11 billion in accounting fabrications. Such graft transformed Bernard Ebbers from WorldCom’s CEO into federal prisoner No. 56022-054. He is at Oakdale Penitentiary in Louisiana, serving 25 years for fraud, conspiracy, and filing false statements.
• Meanwhile, Democrats and Republicans maintain a misallocation-of-funds conspiracy within a Ponzi scheme called Social Security.
In 2009 — the year before benefit payments began to outpace payroll-tax revenues, seven years sooner than officials projected — Heritage Foundation analyst David John reports, Social Security received $689.1 billion in payroll-tax revenues. It paid beneficiaries $685.8 billion, leaving a $3.3 billion surplus.
The Treasury took this $3.3 billion and placed a non-negotiable Special Issue Treasury Note of equal nominal value into the Social Security Trust Fund. These self-IOUs (literally stored in a filing cabinet in Parkersburg, W. Va.) obligate future Congresses to tax or borrow money to pay these retiree-benefit bonds decades hence.
And then the Treasury let Congress spend this $3.3 billion on everything from ethanol to education to the EPA.
Such chicanery smacks of embezzlement under Section 664 of the Employee Retirement Income Security Act (ERISA). On March 9, the Ninth Circuit Court of Appeals endorsed the convictions of executives Sigmund Eriksen and Raymond Eriksen, as Judge Milan D. Smith, Jr.’s opinion states, “stemming from their misappropriation of employee 401(k) contributions to pay their company’s operating expenses.” Staffers at Lunde Electric Company, a now-sunk Seattle maritime electrical-repair firm, eventually were made whole. Nonetheless, this father and son each must endure two years of probation, a $20,000 fine, and 240 hours of community service.
• The Securities and Exchange Commission and Section 448 of the Internal Revenue Code require that nearly all companies with revenues exceeding $5 million use accrual accounting to reflect current finances and long-term liabilities. Despite being elephantine, the federal government instead employs cash-basis accounting — as do dry cleaners and shoe-repair shops.
“Since cash-basis accounting ignores government obligations to spend money in the future, it gives a disastrously incomplete and inaccurate picture of where the government really stands,” wrote CPA and former congressman Joseph DioGuardi (R., N.Y.) in his book Unaccountable Congress.
Similarly, Title 17, Part 210 of the Code of Federal Regulations features this Securities and Exchange Commission rule: “Financial statements filed with the Commission which are not prepared in accordance with generally accepted accounting principles will be presumed to be misleading or inaccurate.” Thus, if presented by a private company, Uncle Sam’s books would be considered dodgy, if not cooked.
As Washington struggles to cap a giant geyser of red ink, it should stop practicing accounting that, in business, would be considered criminal.
—Deroy Murdock is a nationally syndicated columnist with the Scripps Howard News Service and a media fellow with the Hoover Institution on War, Revolution and Peace at Stanford University.
And the really sad part is this list isn't all inclusive. It's not even just the tip of the iceberg. It's more like just scratching the surface of the tip of the iceberg.
The way the CBO is handled is clearly fraudulent. Accounting isn't subject to the whims of congress. It should be illegal and a criminal offense to tell an accounting division what to count and not count. But the criminals go even further than that. They use the fraudulent results as the primary sales point for their fraudulent "laws". Every person who has spent a minute in congress and who hasn't regularly and loudly proclaimed that this is fraud should be jailed for life.
If the government were run as a business, it would have to put up with the possibility of competition. It has a monopoly. Imagine there were another provider of government services, but fewer of them -- just the ones in the Constitution, at a cheaper price. And then you could get "GovernmentGap Part D" if you wanted more services, but you would have to pay out of your own pocket. I bet we'd mostly sign up for a lean provider and let the extra stuff (e.g. bailouts, and whatever else isn't Constitutional) slide.
I wanted to reiterate the very important point that proreason made so that people understood it clearly.
The CBO is always proclaimed by both parties to be unbiased and the Gold Standard of accounting. What the people should also know is that they will crunch the numbers provided to them, however fraudulent these numbers provided are. For example, Obama can estimate a GDP increase of 5% per year if he likes, they won't criticize the number provided, yet there is no way a 5% GDP increase per year is going to happen, but it will make his budget look really good at growing the revenues, even though it is smoke and mirrors.
On occasion they will comment on a projection such as above, but it is not consistent, nor mandatory to point such projections out as unlikely or even impossible, even if they were.
So as in the case of Obamacare, they get CBO to run the numbers they provide, when they look how they want them to look, they run out and vote on it before you know what's in it. Some weeks or months later someone realizes $500 billion is stolen from Medicare and was used to fund Obamacare, yet Obama and team claim you can use the same $500 billion for both at the same time, which is obviously impossible.
CBO is used as a tool to deceive in such instances, which is why Boehner wants to post items for 72 hours prior to voting on them, so things like that can be known prior to a vote, not after the fact as the Democrats insist upon as they are the biggest crooks of all, obviously.
Budgets are a hoax. It is long past the time when we should be demanding quarterly and annual reports from all levels of government. Where did the money go and what is the condition of assets under their charge?
In a debt based money system like ours, the only way to increase money supply is to increase debt. Now with the bust of 2008 rolling into 2011, the government has had to take on debt to try to fill the gap left when the sub-prime mortgage crisis revealed that all the credit (or debt based money) that were pyramidded on top of complete financial garbage.
Asking Congress to cut spending is asking for a depression because it will reduce money supply. Collectively eliminating personal debt and collectively taking cash out of the bank will also do the same thing. Maybe some of the smarter types can think of a strategy to collectively crash the system to drive change like the Democrats did for Barack Obama in 2008. Let's call it a "capital strike".
But the bigger picture is that without monetary reform to a non-debt based monetary system the government can never dig out and no one will understand why Washington does what it does. Washington is a shell dedicated to supporting the banks of the Federal Reserve. That is why instead of the US issuing dollar bills, it issues Treasury notes to the Fed and pays interest forever after. Electing bought and paid for Republicans like Romney or Trump will change nothing. Elect Ron Paul and your getting somewhere.
I know that Ron Paul will be mauled as a candidate because he would kill the financial monopoly of the Central Bank and with it would die the Socialist power of the Democrats. I'm beginning to wonder why have I never read that on NRO's august pages. Please tell me that NRO is part of the solution. Please...
Actually, the federal government does not use cash based accounting. It uses fund accounting, which is common for government organizations. Expenditures are first recognized on accounting records when a contract is entered; this is called an obligation and is what is limited by appropriations acts. This system is why so many different numbers are thrown around about the budget deal. It will reduce obligations by $38 Billion, even though cash outlays may reduced by a much smaller amount in fiscal year 2011. However, cash outlays in future years will be reduced as the reductions in obligations catch up with them.
Needless to say, long term obligations like Social Security are not recognized until they are actually due.
But the basics of federal government accounting are widely recognized in accounting circles. In fact, there is a whole set of standards about how this should be done.
This article should form the basis of three RNC commercials. Democrats have succeeded in vilifying corporate America. Republicans need to explain that government fraud dwarfs corporate fraud and continues unabated.
