August 29, 2006
TOO CLEVER BY HALF....Guess what? The end of the federal government's fiscal year — September 30 — is rapidly approaching, and George Bush's minions have had a brainstorm: federal bureaucrats should put off as many purchases as possible until October so that this year's spending looks nice and frugal. After all, we don't want any headlines about skyrocketing government spending just before the midterm elections!
Alternatively, if no actual purchases can be delayed, just delay payment for services already rendered. Like, say, for Medicare services:
The bureaucratic brainstorm was straightforward — simple-minded is, perhaps, a more appropriate description — don't pay doctors, hospitals and their army of auxiliaries tending to indisposed old folks and the afflicted disabled for their labors in the last nine days of the current fiscal year. Instead, send them a check for what you owe them, sometime after the first of October, the start of the government's fiscal '07. In essence, those doctors, hospitals et al. are making an involuntary loan of nine days' pay without interest.
That way, point out the gleeful budgeteers and Medicare pooh-bahs, all of whom presumably are glowing with health, Uncle Sam's Medicare tab this fading fiscal year will be $5.2 billion less than it otherwise would have been. Or at least would seem to be $5.2 billion less — in Washington, as we all know, appearance and reality are not invariably the same phenomena.
Apparently, these people genuinely think that no one has ever thought of this trick before. And they're right, as long you don't include every sales manager and CFO who's ever lived. Needless to say, that $5.2 billion will get tacked right onto next year's budget, so it's not like we're saving anything. It's just that we don't have any elections next year.
Honest to God, every time you think these guys can't get any more puerile, they do. It's like having a bunch of scheming high school freshmen running the country.
Via Barry Ritholtz.
UPDATE: It looks like my outrage may have been misplaced. See here for a more mundane explanation for the shutdown.
UPDATE 2: My outrage turns out to be well deserved after all. The payment delay is indeed mandated by law, not by a squirrely computer system.
—Kevin Drum 1:05 AM
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Well, they did get a bunch of scheming high school freshmen to run Iraq, so this is par for the course.
Posted by: Fred F. on August 29, 2006 at 1:14 AM | PERMALINK
Nine days of Medicare expenses is lost in the budget noise--about two percent. Not really an issue.
Posted by: gao on August 29, 2006 at 1:15 AM | PERMALINK
Kevin Drum >"...It's like having a bunch of scheming high school freshmen running the country."
Uhhh, I thought that`s what we`ve had since January 2001
maybe I`ve missed something along the way...
"He that will not apply new remedies must expect new evils, for time is the greatest innovator." - Francis Bacon
Posted by: daCascadian on August 29, 2006 at 1:17 AM | PERMALINK
Oh, we've seen this before. The scum of the earth strike again. Former College Republicans this time.
Copyright 2004, The Seattle Times Co.
By David Postman and Jim Brunner
Seattle Times staff reporters
The College Republican National Committee has raised $6.3 million this year through an aggressive and misleading fund-raising campaign that collected money from senior citizens who thought they were giving to the election efforts of President Bush and other top Republicans.
Many of the top donors were in their 80s and 90s. The donors wrote checks — sometimes hundreds and, in at least one case, totaling more than $100,000 — to groups with official sounding-names such as "Republican Headquarters 2004," "Republican Elections Committee" and the "National Republican Campaign Fund."
College Republicans serve as the party's outreach organization on college campuses. The group has been a starting place for many prominent conservatives, including Bush adviser Karl Rove, anti-tax activist Grover Norquist and former Christian Coalition executive director Ralph Reed
Posted by: Mario on August 29, 2006 at 1:39 AM | PERMALINK
Wait, you're saying that these guys are dishonest hacks?
Boy, wait until GOP and the rest of them get here to say "nuh uh" - then you'll feel silly.
Posted by: craigie on August 29, 2006 at 1:48 AM | PERMALINK
Is the US Government not using an accrual accounting budgeting principal? If this is the case - and I guess it is/should be, then the cash flows does not matter for the budget position (and rightfully so)
Posted by: Lars on August 29, 2006 at 1:48 AM | PERMALINK
The CEO presidency in action!
Too bad it resembles bushiekins other failed tenures as CEO.
Posted by: joe on August 29, 2006 at 1:49 AM | PERMALINK
I call BS.
After the Enron debacle, and how the Bush Administration has worked so hard to get all those accounting-scandal crooks and bad CEO's out there, there's no way they'd try to game the numbers like that with their own accounting. It would be hypocritical, and they'd never get away with it with those GAO accountants looking over their shoulders.
In fact, A check just arrived today for my Medicare, (although it was signed by someone named "Death Star").
Posted by: osama_been_forgotten on August 29, 2006 at 2:00 AM | PERMALINK
In essence, those doctors, hospitals et al. are making an involuntary loan of nine days' pay without interest.
Most vote republican.
I am sure they won't mind.
You know... win one for the Gipper and all that...
Posted by: koreyel on August 29, 2006 at 2:02 AM | PERMALINK
In fact, I just phoned their 1.800 number, and their phone rep, M. Yass assured me that the money would be there.
Posted by: osama_been_forgotten on August 29, 2006 at 2:02 AM | PERMALINK
Is the US Government not using an accrual accounting budgeting principal?
It used to. But when the grownups took charge in 2000, they changed it to the "under the mattress" system. Now all the tax revenue is kept under a giant mattress in DC - it works great!
Posted by: craigie on August 29, 2006 at 2:03 AM | PERMALINK
Bush is the Harvard MBA President. This is how all large corps operate.
Posted by: Hostile on August 29, 2006 at 2:11 AM | PERMALINK
I remember sitting in a staff meeting once, listening to the big boss happily crowing about how he had "made" the monthly sales numbers by taking some of our regular product, the outer casing of which was blue, and having the production line stay overtime to repaint them, to ship to our biggest "OEM" customer, who resold them under their own name, and whose products were all painted black (because the stock room was out of the 'black' units).
In front of the whole senior staff I asked him "So, you cut into out margins, and the company's yearly profits, by spending extra money just to ship something on the 30th of this month, instead of shipping them on a normal schedule the 2nd or 3rd of next month? And we're supposed to happy about that? Which is the object of the game here, monthly sales numbers, or end-of-year profit?"
I didn't work there a whole lot longer after that.
Posted by: Robert Earle on August 29, 2006 at 2:12 AM | PERMALINK
Apparently, these people genuinely think that no one has ever thought of this trick before. And they're right, as long you don't include every sales manager and CFO who's ever lived.
But it only works if you're using cash accounting; companies with over $1M in revenue are required to use accrual accounting.
Of course this is the government, so it can make its own rules, and medicare and social security use cash accounting.
Other trivia... Cash accounting is used for the official *cough* federal numbers, whereas the audited federal numbers uses accrual (neither of those include social seurity or medicare. Only 18 of 24 departments produce audited financial statements; the rest are still so screwed up--including the DOD--that auditors refuse to certify the results.
Posted by: has407 on August 29, 2006 at 2:19 AM | PERMALINK
In front of the whole senior staff I asked him "So, you cut into out margins, and the company's yearly profits, by spending extra money just to ship something on the 30th of this month, instead of shipping them on a normal schedule the 2nd or 3rd of next month? And we're supposed to happy about that? Which is the object of the game here, monthly sales numbers, or end-of-year profit?"
Posted by: Robert Earle on August 29, 2006 at 2:12 AM | PERMALINK
. . . thus causing a spike in corporate share price, allowing the options-laden executive staff a tidy bonus of six-figures, so their teenage daughter won't have to settle for factory audio, or fabric upholstery in their Lexus this year.
Posted by: osama_been_forgotten on August 29, 2006 at 2:23 AM | PERMALINK
Some years ago, the Government (Reagan or Bush I, iirc) made the decision to pay active duty military on the 1st of the next month rather than on the 30th of a given month.
The primary reason was pretty transparent: it shifted the 1/12 of the annual payroll from September of one fiscal year into October of the next year.
Posted by: Wapiti on August 29, 2006 at 2:25 AM | PERMALINK
Some years ago, the Government (Reagan or Bush I, iirc) made the decision to pay active duty military on the 1st of the next month rather than on the 30th of a given month.
Posted by: Wapiti on August 29, 2006 at 2:25 AM | PERMALINK
Schwartzenscammer tried to do the same kind of shell-game here, in California, with vehicle-registrations, but it was defeated.
Posted by: osama_been_forgotten on August 29, 2006 at 2:37 AM | PERMALINK
My daughter is in a good high school in a university town. I assure you the freshmen at her high school are smarter than this.
Posted by: kevin_r on August 29, 2006 at 2:53 AM | PERMALINK
Blogger is going ape shit. Internal server error 500. All over the blogsphere. Somebody get on the phone and find out what the #$## is going on!!
Posted by: patience on August 29, 2006 at 2:59 AM | PERMALINK
Honest to God, every time you think these guys can't get any more puerile, they do. It's like having a bunch of scheming high school freshmen running the country.
If it hadn't been for their Democratic opponents, none of them could ever have been elected.
I agree that's a stupid idea, and I hope it dies.
Posted by: republicrat on August 29, 2006 at 3:48 AM | PERMALINK
"Well, [the Bush Administration]did get a bunch of scheming high school freshmen to run Iraq, so this is par for the course."
They were not "scheming high school freshmen."
They were actually scheming recent college graduates who were emotionally stunted at a 14-year-old level, recruited by the minions of a 60-year-old alcoholic who thinks it's really funny to break wind in public.
Posted by: Donald from Hawaii on August 29, 2006 at 3:57 AM | PERMALINK
Oh, but... I got nothin'.
Posted by: Al on August 29, 2006 at 4:06 AM | PERMALINK
Apparently, these people genuinely think that no one has ever thought of this trick before. And they're right, as long you don't include every sales manager and CFO who's ever lived.
LIke the jackass CEO our company had about 10 years ago. His brilliant idea was to pay the workforce for December (we're paid once per month) in January. It was a onetime thing and I'm sure it made him a nice bonus. But none of the CEOs we've had since want to take the hit and move our December pay back to December. So every month we get a check on the last business day, except December. In January we get a check the first day and the last day. Of all the dumb ideas that the government could steal from business, on this one they should pass.
Posted by: JJF on August 29, 2006 at 4:10 AM | PERMALINK
If it hadn't been for their Democratic opponents, none of them could ever have been elected.
Wait, are you saying that Democrats have to save Repubicanists from themselves, for the good of the country, or something? That would, you know, tend to yield the floor to the adults, and I'm not complaining, but, wow.
Posted by: fishbane on August 29, 2006 at 4:12 AM | PERMALINK
This wasn't about a brainstorm. This was already fixed in the "Deficit reduction act 2005" as passed beginning this year:
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_cong_bills&docid=f:s1932enr.txt.pdf
(Section 5203)
As first noticed by:
http://rogerailes.blogspot.com/2006_07_23_rogerailes_archive.html#115379010978649356
So they already figured this one out early on. But the elections are comming, they knew that all the time.....
Posted by: Steeph on August 29, 2006 at 4:35 AM | PERMALINK
This sort of trickery isn't original to the Bush Administration. I recall that, sometime during the 90s, the Clinton Administration moved the effective date of a Federal pay increase one day to get it into a different month, as part of the same sort of deal.
It isn't about who's in charge, it's about the crazy things our budgetary process allows them to do. Pay it now, or pay it later, bottomline is we're all gonna pay.
I'd much rather see somebody explain how Congress could pass a retroactive tax increase.
Posted by: Trashhauler on August 29, 2006 at 6:35 AM | PERMALINK
It makes sense to consider this tactic in the private sector -- lump as many payables as possible into the end-of-year to maximize expenses and minimize taxes.
But if you are the organization that collects the taxes and doesn't have to pay taxes it makes no sense.
Maybe this is practice for when the government runs out of money. All those tax cuts for the wealthy are catching up with us after all.
Posted by: pj in jesusland on August 29, 2006 at 6:43 AM | PERMALINK
It's good you point out that this is not new. Every Administration, Rebuplican and Democrat, has done the same.
Posted by: Berlins on August 29, 2006 at 6:49 AM | PERMALINK
Not only have Rep and Dem administrations done the same accounting practices, but the fact is that corporations do the same. Corps have to do it with accrual accounting, but it really isn't that difficult for them to do: when they're going to have a loss in a quarter, they throw all the losses they can think of into the quarter. Of course, the next quarter will look much brighter.
It's stupid, but that's the way the thing goes.
Posted by: raj on August 29, 2006 at 7:06 AM | PERMALINK
that $5.2 billion will get tacked right onto next year's budget, so it's not like we're saving anything.
My guess is that they'll use it as evidence of an out of control entitlement program and push legislation to privatize medicare. It's not a problem, it's a feature.
Posted by: B on August 29, 2006 at 7:47 AM | PERMALINK
I have recently been informed that one of my clients has been told by its government customer that payment will not be made on a large contract until October. Just like last year I have been told that I will be paid as soon as the client is paid. I wonder if that will work with my mortgage banker?
Actually this is something government contractors enounter every August/September. It is really bad in those years when the Congress can't pass a budget.
Posted by: Ron Byers on August 29, 2006 at 8:25 AM | PERMALINK
Man, that's just said. Maybe they can smash some piggie banks or something while their at it so say that revenues are up so we need more tax cuts.
America's Least Wanted
Posted by: budpaul on August 29, 2006 at 8:56 AM | PERMALINK
Isn't the government on an accrual basis of accounting so it really doesn't matter when the cash gets paid, it's when the services are rendered that determines when the expense gets booked. What am I missing here?
Posted by: Fred on August 29, 2006 at 8:58 AM | PERMALINK
"a bunch of scheming high school freshmen running the country!"
Who let them get past sixth grade!?
Posted by: paul on August 29, 2006 at 9:00 AM | PERMALINK
The news of what they're doing will get out.
But if falls into the same dirty trick category this Admin typically employs -- selling schemes via the bully pulpit. It will be much easier for the WH to put a positive spin on the resulting '06 numbers before Nov. than it will be for opponents to successfully explain the shell game to the public. Only willing critics will readily absorb it.
Posted by: wishIwuz2 on August 29, 2006 at 9:29 AM | PERMALINK
Do you think things have been done differently in the years / administrations prior to this? Spending shuts down every year about NOW until Oct. 1st.
Posted by: gov worker on August 29, 2006 at 9:34 AM | PERMALINK
Isn't the government on an accrual basis of accounting
Hahaahahahahhhaa! Yeah, it totally covers accruing future liabilities related to social security, medicare, veteran benefits, pensions for congressmen, destroyed and over-used military equipment in Iraq, CIA and DOD contracts, etc. That's why the DOD includes Iraq in their annual budget request and everyone knows our national debt is approx. 50 trillion.
Posted by: political chipmunk on August 29, 2006 at 9:38 AM | PERMALINK
Geeze, I thought I was being clever when I send out the bills I usually send out the first of the month on December 15......
Posted by: PetervE on August 29, 2006 at 9:46 AM | PERMALINK
One quick correction concerning Kevin Drum's "To Clever by Half" article. The Federal Government, as well as State and Local governments, use a modified accrual based accounting system while private industry uses an accrual based accounting system. One of the primary differences between these two accounting systems is that in an accrual based system, expenses are accounted for when the payment is made. In a modified accrual system, expenses are accounted for when the service has been rendered or the good has been received. Therefore, in the Federal government, any expenses encumbered during the 2006 fiscal year will have to be accounted for in the 2006 financial reports, regardless of when the payment was made. This, however, does not preclude the bureaucracy from casting a rose colored glow on Year to Date Medicare expenses because the financial reports will not be ready for at least 6 months, well after the mid-term elections.
Posted by: Jonathan Ingram on August 29, 2006 at 9:59 AM | PERMALINK
Kevin, this may be your lamest post in months.
Government agencies have been doing this since the dawn of, well, since the dawn of government agencies.
You breathlessly write like Bush/Cheney/Rove are engaging in a devious plot to keep spending under budget.
The only thing missing was ending your post with your trademark "Worst. President. Ever."
Kevin, you need to get a grip.
Posted by: Frequency Kenneth on August 29, 2006 at 9:59 AM | PERMALINK
I love how liberals complain about an involuntary nine day lone with no interest, but support a program that forces citizens to loan the government money at 'negative interest, also known as social security.
Posted by: American Hawk on August 29, 2006 at 10:05 AM | PERMALINK
Government agencies have been doing this since the dawn of, well, since the dawn of government agencies.
and i'm sure that when all those GOP Reps give their stump speeches, they'll give that very disclaimer, right after they trumpet how much they've cut the budget.
Posted by: cleek on August 29, 2006 at 10:28 AM | PERMALINK
Wait, you're saying that these guys are dishonest hacks?
Boy, wait until GOP and the rest of them get here to say "nuh uh" - then you'll feel silly.
Posted by: craigie
Unfortunately, I think the right-wing spin on this type of news is "well, we've always said big government sucks." Never mind who sucks at it more, or precisely in what ways it sucks, or actually trying to do something about the suckiness, or...
Posted by: Cyrus on August 29, 2006 at 10:33 AM | PERMALINK
Hey AH, thanks for the totally dishonest talking points about Social Security. Didn't you notice that everyone caught on that the 'negative interest' claim was a _lie_?
Yes, it is stupid that the government plays games with cash-basis accounting rather than going to accrual accounting as it should, but, as was noted by a number of people, this is bipartisan dishonesty, even though it is the Republicans lying about the shrinking deficit at the moment.
Remember, it's not a tax cut if you have to borrow money to pay for it.
Posted by: freelunch on August 29, 2006 at 10:46 AM | PERMALINK
Everyone here mentioning that this is not new, is of course right. Maybe the difference here is that this is just another "lack of truthiness" tactic in a long line of shell games, obfuscations, and flat out lies whose source is this administration. In the past, playing with numbers was the offense. Today, the offense seems not to be playing with numbers but playing the American public for fools.
Posted by: jcricket on August 29, 2006 at 10:50 AM | PERMALINK
Isn't this called fixing the books? Haven't people gone to prison for this sort of thing under Sarbanes-Oxley?
Posted by: jan on August 29, 2006 at 10:52 AM | PERMALINK
"If it hadn't been for their Democratic opponents, none of them could ever have been elected."
No, if it hadn't been for militarist, theocratic fascist American morons, they could never have been elected.
Posted by: brewmn on August 29, 2006 at 10:54 AM | PERMALINK
Put two drunken criminals in charge and this is the sort of mismanaged fiasco you should expect...
Posted by: The Conservative Deflator on August 29, 2006 at 10:56 AM | PERMALINK
every time you think these guys can't get any more puerile, they do.
I quit thinking these guys can't get any more puerile a long time ago.
Posted by: Gregory on August 29, 2006 at 11:08 AM | PERMALINK
Didn't Enron and Worldcom execs go to jail for stuff like this?
Posted by: Paul J on August 29, 2006 at 11:20 AM | PERMALINK
And in the states, where balanced budgets are usually a constitutional requirement, the push at the end of the fiscal year is to pay off everything ASAP and use up their budgets... matter of fact, this seems to be true for most nonprofits as well. I'm no accountant, but I do find it pretty ironic that the federal government is being run like a corrupt business and the states are functioning with the oversight and lack of deficits that are required by law from nonprofits. Guess you can regulate fiscal responsibility.
Posted by: latts on August 29, 2006 at 11:34 AM | PERMALINK
Welcome to the United States of Enron.
Check your tenuous attachment to reality at the door.
“True terror is to wake up one morning and discover that your high school class is running the country.”
Kurt Vonnegut
Posted by: CFShep on August 29, 2006 at 11:36 AM | PERMALINK
Another trick along these lines is agencies "obligate" or "MIPR" unspent funds to other agencies or contractor buddies in the current end-of-year so the money does not revert back to the treasury and (god forbid) help balance the budget. "MIPR" is an acronym for an agency interfund transfer.
Then, when the new budget year rolls around the recipient agencies "de-obligate" the money and spend it on their unfinished pet projects.
I hear it was common during the Vietnam war for the Navy to obligate unspent money to the TVA and then the TVA would de-obligate and transfer it back after October 1.
So yes, fiscal sleight-of-hand is as old as the hills, or Senator Byrd. It's the scope of the current fiscal mismanagement that is so galling.
Vendors should be paid for completed work according to the terms of their contracts. Period. That's what the law calls for.
Posted by: pj in jesusland on August 29, 2006 at 11:40 AM | PERMALINK
For the govesrnment to defer spending to the next fiscal year deserves praise.
Traditionally, near the end of each fiscal year, agencies spent every dollar remaining on their budget, whether they needed it or not. Then they could argue that they needed even more money the following year. If they didn't spend their entire budget, their budget might be cut.
Of course, that year-ending spree caused a lot of wasteful spending.
When agencies put off spending to the next fiscal year, they will have less to spend next year. They will have to be more prudent in how they handle their money next year. Hurray for the Bush administration!
Posted by: ex-liberal on August 29, 2006 at 11:40 AM | PERMALINK
Shorter "ex-liberal": Dishonest accounting results in fiscal prudence!
Lame effort, even by your own standards of dishonesty, "ex-liberal".
Posted by: Gregory on August 29, 2006 at 11:49 AM | PERMALINK
To paraphrase P.J. O'Rourke--"Republicans claim that government doesn't work, then they get elected and prove it."
I don't think I got that quite right, but you catch the drift.
Posted by: Ringo on August 29, 2006 at 12:10 PM | PERMALINK
For the govesrnment to defer spending to the next fiscal year deserves praise.
Yes, it does, but this isn't what is being discussed. The government has decided not to pay its bills on time. The money was spent already. George Bush is a very big spender. Democrats will never again have to listen to Republicans complain about how expensive their government is because the Republicans have set the standard for spend-and-spend government. The difference is that the Democrats didn't lie about how much it costs.
Posted by: freelunch on August 29, 2006 at 12:12 PM | PERMALINK
Does the Fed government not get audited? In the non-proifit sector, if you tried this move your auditors would tell you to accrue the expenses in the appropriate fiscal year as is required under GAAP. It matters not when the check is written, but rather when the expense is incurred.
Posted by: ann on August 29, 2006 at 12:36 PM | PERMALINK
"Didn't Enron and Worldcom execs go to jail for stuff like this?"
Actually, no. This kind of manuever is child's play by comparison to what Enron did.
Posted by: am on August 29, 2006 at 12:39 PM | PERMALINK
mario: College Republicans serve as the party's outreach organization on college campuses. The group has been a starting place for many prominent conservatives, including Bush adviser Karl Rove, anti-tax activist Grover Norquist and former Christian Coalition executive director Ralph Reed
you left out jack abramoff
Posted by: thisspaceavailable on August 29, 2006 at 12:59 PM | PERMALINK
Not only has it been done before by businesses, it has been done by governments. Governor Owen of Colorado did it several years ago---and predictably, the media fell for it.
Posted by: john d'oh on August 29, 2006 at 12:59 PM | PERMALINK
After all, we don't want any headlines about skyrocketing government spending just before the midterm elections!
Rebublicans really do not need to worry about this. Federal spending as a percent of GDP is down slightly from the Clinton years: 20.5% compared to 21.5% (approximately). If federal spending is "skyrocketing", then GDP is "skyrocketing" slightly faster.
fishbane: Wait, are you saying that Democrats have to save Repubicanists from themselves, for the good of the country, or something? That would, you know, tend to yield the floor to the adults, and I'm not complaining, but, wow. This kind of accounting shift has been done before with Democrats holding the Presidency and both houses of Congress, and with the Presidency and the Congress held by different parties. If Democrats ran better candidates than what they have to date, the Senate and House would still have Democratic majorities, and KD would be comparing the Democratic leadership to adolescents.
Posted by: republicrat on August 29, 2006 at 1:16 PM | PERMALINK
"It's like having a bunch of scheming high school freshmen running the country."
What an insult to high school freshmen!
Posted by: howard on August 29, 2006 at 1:40 PM | PERMALINK
This discussion is sounding interesting. There may be more to what sounds like simple delayed government bill paying than meets the eye.
If an agency doesn't spend all its money, it's my understanding that unspent funds revert back to the Treasury. So, there must be some accounting irregularites going on that enable agencies to keep their unspent funds until the next fiscal year.
If this is what's going on, somehow agencies are booking expenses or obligations to lock the funds away but not accounting for the expense in the current fiscal year in order that the funds be available after October 1.
Sounds like an accounting trick to reduce the FY06 deficit just before November. I can see the October headlines now, "FY06 federal deficit comes in lower than expected. Bush cites growing economy, sound fiscal management . . ."
They literally don't miss a trick.
Posted by: pj in jesusland on August 29, 2006 at 1:47 PM | PERMALINK
Ann: I have an old 'Governmental Accounting' textbook around here somewhere I can lend you.
You might want to tighten your seatbelt. You're in for a bumpy ride.
Government doesn't do 'accrual accounting'. Never heard of it. Likewise GAAP.
Posted by: CFShep on August 29, 2006 at 2:08 PM | PERMALINK
There is no accounting irregularity, although there is definitely a management irregularity.
However, this only works with Medicare and Social Security, which operate on a cash basis; the rest of the government operates on an accrual basis.
In short, accounting tricks that work for Medicare and Social Security don't work for the rest of the government, and vice versa.
Posted by: has407 on August 29, 2006 at 2:08 PM | PERMALINK
Meanwhile, it has gone unremarked in the media - with over a month left in the fiscal year to accrue more debt- we've ALREADY just set the record for biggest annual increase in the Federal Debt in history. As AngryBear put it:
"Did I mention that year-to-date, the increase in
the National Debt has set a new record? (As of Aug
24th, the National Debt has increased $574.4
Billion for fiscal 2006; the fiscal year ends Sept
30th)."
But you can bet they will try to tell us they reduced the deficit this year. Bank on it.
Posted by: chaboard on August 29, 2006 at 2:09 PM | PERMALINK
republicrat: Rebublicans really do not need to worry about this. Federal spending as a percent of GDP is down slightly from the Clinton years: 20.5% compared to 21.5% (approximately).
Cherry picking, big time.
The peak under Clinton was 21.4% in 1993. From then on it consistently went down, falling to 18.5% at the end of the Clinton administration (forget the Republican Congress schpiel - it started dropping before that). Under W it's pretty consistently climbed, to 20.3% in 2005.
See figure 3 of this document from those well known Clinton apologists, the Cato Institute:
http://www.cato.org/pubs/pas/pa543.pdf
Posted by: alex on August 29, 2006 at 2:10 PM | PERMALINK
Sorry, should have said "semi-accrual" basis in previous post. If you want to see what the government's idea of a financial statement looks like, you can find it here:
Each year, the Administration issues two reports that detail financial results for the Federal Government: the President’s Budget on the cash basis and the Financial Report on the accrual basis. The two reports complement each other. The budget report contains mainly cash receipt and outlay information and compares the results to the appropriations for the current fiscal year. The Financial Report uses those transactions as its base and also contains noncash-based revenues and expenses. ... The information in the financial statements (pages 36-40) was prepared based on U.S. GAAP standards developed by the Federal Accounting Standards Advisory Board (FASAB).
Posted by: has407 on August 29, 2006 at 2:16 PM | PERMALINK
Is it seriously possible that our government does not operate on accrual accounting. After all, expenses are accrued when they occur and delaying payment will not affect that. I cannot believe that the largest system of accounts in the world is operated on a cash basis.
Really, what this means is the people running the government know nothing about how government is run.
Posted by: Kija on August 29, 2006 at 4:11 PM | PERMALINK
shifting the goalposts will only work if we let them do it. when they defer the payments, we riff on it, asking doctors how they're liking this little bit of bait & switch, and give the people the hard numbers on the october budget surprise. hell, if we take their playbook, we can just project that elephant on through fiscal '07 and let everybody know that a budget crisis is at hand, not failing to remind them that this is the way little george mismanaged every enterprise unfortunate enough to fall into his peurile grips since his graduation from that ivy in connecticut.
Posted by: Emory Walker on August 29, 2006 at 4:25 PM | PERMALINK
Somebody above mentioned that the current policy must mean that the tradition of the government buying all kinds of stuff just before the end of the fiscal year has been fixed. Wrong. Government agencies still contract to buy stuff to spend any left over money. If you don't spend it you don't lose it in the next budget. They just don't cut checks until after the beginning of the fiscal year for all the stuff purchased in September.
Don't give me generally accepted accounting practices or fiscal vs cash accounting. All of that is for wimps in the private sector. It has nothing to do with government accounting. Don't ask how it all hangs together logically. It doesn't. Again we are talking government accounting practices.
All I can say is budgetary slight of hand people are lambasting in this thread have been used since 1776 or earlier. Nothing new here.
Posted by: Ron Byers on August 29, 2006 at 4:35 PM | PERMALINK
As much as I dislike Bush, this is not a new tactic. Governments at all levels engage in this type of activity. All the media need do is ask about spending that lapses into the next fiscal year.
Posted by: Stuart Shiffman on August 29, 2006 at 5:35 PM | PERMALINK
I don't get the correction. Is the government going to spend at it's usual pace or accrue for the gap in spending in this years financial results?
e.g. just because a whole bunch of well intentioned honest people tell you that banks withold funds for out of state checks for 5 days because it is necessary to protect against fraud/overdraft and kiting schemes doesn't change the fact that the a financial institution party to the transaction earns interest on the money every moment along the way, while interest is suspended on the account being drawn on immediately and does not begin to acrue in the destination account until after the waiting period.
In other words, a good logical reason can be very good and logical and still produce results advantageous to some and detrimental to others.
Skipping Medicare disbursements, no matter how explainable and unavoidable, still cooks the books and favors those wishing to make the government less spendthrifty.
Posted by: johnd on August 30, 2006 at 12:06 AM | PERMALINK
The even more frustrating part of this stupidity is that this kind of thing only works once -- you get a one time boost in how your budget actuals look for one year, but then either get a counterveiling bad year the next year with 8 extra days, or you have to eternally, year after year, pull this same expensive crap.
I blogged about the state of Arizona pulling the exact same garbage here
They have chosen to extend a special expense year after year all to not give back the one-time artificial boost they took several years ago.
Posted by: coyote on August 30, 2006 at 1:18 AM | PERMALINK
As an small addendum to my comment above, I object only to the implication that this behavior is somehow the isolated product of just one of the two parties or unique to the Bush White House. This kind of garbage is endemic in government. As Bill Gates might say, it is a feature, not a bug. It is part of the very fabric of politics. Its why I wonder sometimes why the post's author is able to maintain his enthusiasm about strong and interventionist government.
Posted by: coyote on August 30, 2006 at 1:27 AM | PERMALINK