Audit the Books!!!

The first thing President-elect Barack Obama should do to get the economy back on track is publicize the financial record of the Bush Administration. Every business knows that "if you can't measure it, you can't manage it."

Auditing the books is standard practice because CEOs want to know where they stand financially. And no one wants to be blamed for the mistakes of prior management. If the public learns about President Bush's mismanagement after he is safely back in Crawford, Texas, the bad news could cripple the Obama Administration. People blame the messenger.

Fortunately, such an audit will be released on December 15th. It is the Financial Report of the U.S. Government, issued by the U.S. Treasury and signed by Secretary Henry Paulson. It is the only official government document that uses audited, accrual accounting to describe America's financial position.

It is also one of Washington's best-kept secrets. Neither Bush nor Paulson has mentioned it publicly because it reveals national deficits and debts that are much larger than the public has been told. The media have unwittingly participated in the cover-up.

Last year's Report said that the true national debt or "fiscal gap" was not $4 trillion, or even $9 trillion, but $53 trillion. Understanding the difference between these numbers is vital. Does America have a bad cold, the flu, or is it cancer?

We owe $4 trillion if you don't count the $5 trillion that the federal government has already borrowed from the Social Security "trust fund." Many economists say that you don't need to count intra-governmental borrowing, and politicians love the smaller figure. But seniors will demand their full Social Security checks. To protect them, we must recognize that we have borrowed the full $9 trillion.

Even the $9 trillion figure is misleading if you add this year's bailouts and war expenses. The official U.S. debt ceiling was recently raised to $11.3 trillion. In addition, Medicare is facing a shortfall of $30 trillion that the usual Washington budgets fail to recognize. This, plus other entitlement program shortfalls, means that our true fiscal gap is $53 trillion. And that is a "present value" number, meaning that we need $53 trillion today earning interest so that we can have even more money for the benefits that have been promised.

Is your individual share of the national debt $30,000 or $175,000? The Financial Report lays it out in the same annual-report format used by public companies. You get your favorite company's annual report; why not your favorite country's?

The Bush Administration does not want you to know that it borrowed more money in the last eight years than all U.S. Presidents combined had borrowed in the previous 219 years. It also borrowed more money from foreigners that all previous Presidents combined.

The demands of retiring Baby Boomers are not Bush's fault, but his administration has a dismal record there as well. The Financial Report says that our fiscal gap was $20 trillion at the beginning of the Bush Administration but $53 trillion today, a whopping $33 trillion increase.

The annual federal budget deficit is not a few hundred billion dollars but closer to $2.5 trillion if you count the rate at which our entitlement obligations are increasing. The problem is metastasizing at a rate almost ten times faster than the Bush Administration admits.

The financial outlook for the federal government is so grim that the two top credit rating agencies on Wall Street, Standard & Poor's and Moody's, are projecting that the U.S. Treasury bond itself could lose its AAA rating by 2012. This means an increase in interest rates that could damage the economy.

Congress has been busy applying band-aids to these gaping wounds. For example, Medicare needs $5 trillion today in order to pay doctors what they are accustomed to receiving. Uncle Sam doesn't have that kind of money, so Congress is applying six-month or one-year patches that do nothing to solve the problem. For several years, the Bush Administration has not even tried to save physicians -- a core Republican constituency -- from a projected 42% pay cut.

We are running out of band-aids, and our fiscal sickness is spreading. The financial legacy of the Bush Administration cannot be denied. The only question is who will tell the public the truth, and when.

Comments

[jerrypl]

Rep. Jim Cooper, that is a good idea, therefore, get busy writing a bill that would require this incoming president, and all presidents, thereafter, to audit the books once taking office. SO DO IT!

http://eye-on-washington.blogspot.com

[Seamus]

Yes, Mr. Cooper - do it. Members of Congress are supposed to manage OUR resources not just their own.

[RoveRoveRoveYourBoat]

...need a tracking chip in bush to find him in their Uraguay jungle hideout.

[PaHairO]

That would be URUguay, meathead. No jungle there - lots and lots of grasslands, though.

And for that matter, it's PARAGUAY where the Bushies bought 900,000 acres - right next to the loony Moonie !

(There is "jungle" - we say rainforest now - there.)

Try an atlas. And after that, a dictionary.

[Schneb]

I thought it was Paraguay--? But maybe they switched after Paraguay elected a former-pri­est/reform­er President (donated all of his salary to charities?).

But I'd like to see a chip in Bush just to give him that warm feeling of being watched over that he's given to all the rest of us.

If he's not doing anything wrong, he's got nothing to hide, right?

[drkazmd65]

Just further proof (to me anyway) that the Social Security and Medicare/Medicid funds that I have been paying into my entire working life (High School Grad c1983) will be no better than beer and vitamin money by the time I start to hit retirement age.

The entitlement programs are going to change, most likely to limit what can be covered. The Social Security fund will be a pittance relative to living expenses after real inflation. My whole Gen X group is going to be on our own come twenty-odd years from now.

We'll be exactly like the 'Lost' Generation that enjoyed the wild ride of the 1920s while they were trying to get established, and took it hard in the wallet when the Depression Hit. Yep,... history is repeating itself,... again.

[faith]

I agree ! Obama's team should call for an audit first thing. Every organization does that and it will keep the prior WH team/Congress from saying they are not responsible for the unfathomable losses.

[courageunderfire]

Excellent idea. The more the public can see what has happened and is going to happen, the more we can restore the confidence in our nation.

[jmpurser]

Thank you so much for this article. To get a picture of the real accrual based financial picture of our nation's health is painful but necessary. To see how this measure of our health has changed over the last 8 years AND learn of a tool to make valid comparisons going forward is priceless.

For years I've been ranting that the "real debt" was at least twice what the official figure was. To learn that I was too optimistic by at least a factor of two is quite a shock. And several of my favorite "off the books" debts (infrastructure and education) don't seem to be included even in this bleak view.

Folks we are up the proverbial excrement creek and our canoe is on fire!

[bonofide]

My biggest worry is that the President-Elect will be spending more time cleaning up
the mess of the Bush-Cheney years than eneacting the policies of good will that he
said he would like to do. After reading this article it brings it home all the more and
I fear for the future of this country. I hope Barack Obama is the strong leader that I
perceive him to be.

[bygollymissmolly]

Don't despair. Obama is more than capable of handling more than one crisis at a time.

[quadman]

While we are at it, let's have full disclosure on EVERY government run entity. If you do this, I will believe that you are serious about cleaning up Washington. Otherwise, it is painfully clear what the true motives are, revenge.

[maryyooch]

Thank you Rep. Cooper.
Now, I know why the deserving do not get SSD. BushCo blew all the money for his BS wars, his oil cartel and his own pockets (somehow, I believe that)!
They shouldn't just audit Treasury, they should audit everythin this man has ever put his grimy hands on!

[onlyred]

Thank you Mr. Cooper, for making this so clear to one (me) who has played ostrich with our country's financial info for too many elections. It wasn't until this presidency (Bush's) that I really started to pay attention, and your post makes me even more glad that we didn't elect McCain. I feel he would have used his term to cover what Bush did, while making it even worse.. a very horrifying thought!

Quote: "The Bush Administration does not want you to know that it borrowed more money in the last eight years than all U.S. Presidents combined had borrowed in the previous 219 years. It also borrowed more money from foreigners that all previous Presidents combined."

I just want to scream, or cry, or give up, or fight back.. I don't know what to do. What can we do to help our President Elect? Surely he cannot overcome this incredible disaster of idiocy without our help.

Thanks again, Mr. Cooper, terribly depressing, but we did need to know, didn't we?

[jp5472]

Great comment - and we need to follow this when the new report comes out and ask the MSM why it is not being covered. No more "fairy tale" collusion between the press and the Bush Administration.

[Georgia1992]

Please audit the books! For the sake of our country.

[GrainOSand]

Mr. Cooper, I thank you sir for your sensible advice to the president-elect. One of the main problems with Washington for years has been -- too little accountability and transparency. Never has the public been so dumb about “What is really going on!”

If a skunk crawls in your engine and sprays it before it dies, you have choices. You can drive around in that car suffering the stink of a dead skunk still lodged in your automotive works. You can remove that skunk and hope that the smell will go away. Alternatively, you can remove the skunk and invest heavily in the obfuscation that is air freshener and incense (change administrations but not the policies of “blowing off the national foot with the shotgun of ineptitude, cronyism, and corruption”). Lastly, you can remove the skunk, have the engine professionally cleaned from A to Z, and then perform a system wide analysis and/or inspection, for any leftover remnants of skunk that might have crept beyond the engine compartment to infect things like the drive train, or the suspension. Otherwise, you are left to drive with that noxious and poisoning smell of skunk that invades and pervades vehicles of state, and cause passengers and drivers alike to exclaim -- Pee-Yew, what’s that smell!

[Konnie]

as someone who works in the world of accounting, it would be helpful if both sides of accounting were included for a true picture of "worth".an­d "debt" One would also hope that the founding fathers did
not intend for the government be a profit making entity. Therefore I humbly suggest that along
with the "liabilities', an audit of "assets" also take place. How much value do you place on, say, the
Grand Canyon, or the land value under our military posts, or for that matter the posts themselves.
How much are all the used Hummvees worth? See the problem here? Government buildings,
machinery, office furnishings, computers, printers..­..........­..the list is endless. This begs the
question how would a business in the real world handle this. Maybe Uncle Sam should
call up McGladry, or PriceWaterhouse, since they already have plenty of experience working
with Sarbanes/O­xley......­.......I'm old enough to remember the plain old "accounting standards
and practices" that worked for a very long time......­.....

I'm just saying that all the focus on the "debt" fails the perspective test. This is a huge country.
Very few of its citizens can wrap their heads around the concept of a million or a billion dollars.
The words alone are enough to scare the little folk, while the politicians, corporations, and lobbyists
understand and play the system for an ever increasing slice of the pie,

[Marlyn]

"the land value under our military posts"

That would probably be a liability because the military is not required to abide by environmental laws that protect against pollution and the land is toxic.

[emtem]

Sobering figures, sir.

[GranE]

Excellent article. No accountant would advise any manager or CEO to take over the books without first auditing them. Unfortunately, that's not how our government works, but should. I hope to goodness that Obama does a complete fiscal audit covering all 8 years of Bush's nonsense. He has already said that no audit of expense-to-budget has been done in the last five years. You can't operate on PayGo until you do. Obama needs to take a hatchet to this administration and to the books until he knows where every cent is and to whom it is owed. The GAO may have tried to caution congress, but to what extent did they make any believers? Audit the books Mr. President-elect! Put a transition team on it now. My suspicions are that most of the money will be found in the pockets of the war profiteers. We need it back.