Red Ink Run Amok
The interview with Rep. Jim Cooper of Tennessee was scheduled for April 7, the final day that Congress would be in session before taking another vacation, this one a two-week break. It was expected to be a busy day in the House, with final floor debate on the budget resolution to set the nation's fiscal policy for the coming year.
But House Republican leaders pulled the bill, having failed to negotiate agreement on their side of the aisle between conservatives pressing for spending cuts and moderates trying to protect health and education programs.
So Cooper, a conservative Democrat, had plenty of time to talk about one of the most secretive documents in Washington -- the official Financial Report of the United States Government.
Cooper, a member of the Budget Committee, had referred to the document several times during that panel's truncated debate on the budget resolution. Like many of the others in the room -- including the legislators -- I had no idea what he was talking about. So I went to inquire.
Turns out there was an excuse for the widespread ignorance. The report had been completed in early December but was issued on Dec. 15. The Treasury Department, which compiled it, did not even put out a news release announcing its existence. Cooper said the total press run was 1,000 copies, and they have become such rarities that he suggested I could probably take the one he procured for me and put it up for auction on eBay.
You might think that the subject matter is as sensitive as the National Intelligence Estimate that President Bush declassified in order to discredit Joe Wilson.
And it is. The cover letter in the report from Treasury Secretary John Snow contains the bad news. Whereas the budget deficit for fiscal 2005 was officially given as $319 billion, "the government's accrual-based net operating cost . . . was $760 billion in 2005."
That $760 billion is the real difference between the money the government received and the obligations it added in the past year -- in other words, the unfunded costs being passed on to our children and grandchildren.
For years, the federal budget has been stated in cash terms, not the accrual accounting method, which Cooper said has been in use for five centuries and is now mandated for all private corporations. The difference, as he explained it, is this:
If you go to Target and buy an item for cash, it's felt in your wallet immediately. If you buy the same item on a credit card, unless you are using accrual accounting, it is disguised until the bill arrives.
The U.S. government has been running up bills -- notably the promises of pensions and health-care benefits for military veterans and millions of other retirees -- without putting the obligations on the books.
That is what is really scary about the financial report. It contains page after page of graphs showing the probable future course of income and expenditures for Social Security and Medicare. In each chart, the dotted line for spending climbs far faster than the solid line for revenue. Beginning a decade from now, the shortfalls explode in what Cooper calls "a perfect storm" of fiscal ruin.
Cooper is not alone in this worry. David Walker, the head of the Government Accountability Office, official bookkeeper for Congress, said at a briefing last week that the $760 billion accrual deficit "amounts to $156,000 of debt for every man, woman and child in America. For a family, it's like having a $750,000 mortgage -- and no house."
Walker, who has been traveling the country trying to spread the alarm, said flatly that if the tax cuts now in effect are made permanent, as President Bush is requesting, and spending continues to rise at the current rate, "the system blows up. More than half our debt is now financed by foreign countries, and they will exact a price."
Digging out of this mess "will take 20 years," Walker said, but the first step is simply to reassert the budget controls -- spending caps and a "pay-go" rule that requires offsets for any new tax cuts or spending increases.
The Republicans who let those lapse in 2002 refused once again this year to put them back in the budget resolution.
But Cooper and several Republicans on the House committee did succeed in adding a requirement to the pending bill that future budget resolutions at least show the accrual deficit numbers -- a small gesture toward fiscal responsibility.
The message is clear: Congress is balking at even minimal actions needed to get a grip on the budget. The long-term problem is far tougher and will require more leadership and courage than can be found today.