July: No Accounting for Congress
Wednesday, July 3, 2002
By: Tom Schatz

Government is the Worst Crook of All

As members of Congress make political hay with corporate America's accounting scandals, their own financial mismanagement continues to dwarf those companies they excoriate.  While securities regulation and criminal justice bring corporate culprits to justice (raising the question of whether more laws are really necessary), Congress violates its own management rules and standards on a daily basis.

The Budget Enforcement Act of 1974 requires a budget resolution be passed by April 15.  The House passed its version on March 20, but the Senate has no budget resolution at all.  Even with a budget, Congress annually passes supplemental spending bills to circumvent budget caps; they call them "emergency" spending bills, and state that the expenditures do not count against the budget totals for the year.  In a move that surely would make even Ken Lay blush, last year's military construction bill included a provision that threw out the spending caps from the budget resolution passed three months earlier. 

Over the past five years, lawmakers have spent a total of $142 billion above the levels in the corresponding budgets.  That's more than 12 times the misstated figures from Enron, Xerox, and WorldCom combined. 

While states prohibit private sector firms from siphoning off pension trust funds for non-pension spending, there is no such restriction at the federal level.  In fiscal 2000 and 2001, the federal government increased total debt to another record high while claiming a surplus.  They took Social Security and other trust fund money worth $189 billion in 1998 and $228 billion in 1999 to cover general government operational deficit spending.  For 2000 and 2001, they stole another $463 billion from the various trust funds, of which $272 billion came from Social Security. 

The Department of the Treasury currently puts the "debt held by the public" at $3.46 trillion.  But this number does not tell the whole story.  Add to it the $2.65 trillion "intragovernmental debt," i.e. monies one part of government has borrowed from another, and the total national debt is $6.11 trillion.

And it doesn't stop there.  According to Andrew J. Rettenmaier of the National Center for Policy Analysis, if one factors in all the accumulated future federal obligations such as Social Security and Medicare, the total federal debt burden actually soars to a mind-boggling $35 trillion, or about $120,000 for every man, woman and child in America.

Just a small sampling of accounting "errors" in the federal government reveals more than $20 billion in improper payments made annually, about $12.1 billion through Medicare alone.  That money, which officials make little effort to reclaim, will not provide prescription drugs or other services for senior citizens.

There are laws requiring financial accountability that Congress routinely ignores, such as the Chief Financial Officers Act and the Government Performance and Results Act.  For the past five years, the General Accounting Office has been unable to issue an opinion on the government's consolidated financial statements because of certain material weaknesses in internal control and accounting and reporting issues.  "These conditions prevented us from being able to provide the Congress and American citizens an opinion as to whether the consolidated financial statements are fairly stated in conformity with U.S. generally accepted accounting principles," the report stated.

Meanwhile, senators and representatives circumvented the fiscal budget and authorizing process to earmark $20.1 billion in hometown pork projects, including $2 million to restore the Vulcan Statue in Birmingham, Alabama, and $50,000 for a tattoo removal program in San Luis Obispo, California.  These raids on our money go unpunished.

Even worse, failing programs don't disappear, they get more money.  A recent example is the Youth Offenders Eligibility Awards.  Originally intended for offenders 25 and under, at a rate of $1,500 per individual, the program was duplicative, underutilized, and slated for termination in the president's 2003 budget.  Rather than get the hint, Sen. Arlen Specter (R-Pa.) decided to increase the award amount to $2,500 and increase the eligibility age to 35, adding another 481,000 prisoners and creating an official fountain of youth for millions of Americans approaching middle age.  All this as part of a supplemental appropriations bill intended to increase funds for the war on terrorism.

The government's exposure to additional costs and potential losses spreads beyond the obvious programs to government-sponsored enterprises and quasi-governmental entities.  For example, the U.S. Postal Service is $13.5 billion in debt and raised stamp prices to $.37 cents on June 30; it provides a priority mail service that is often slower than first class mail.  Amtrak has cost taxpayers $39 billion in 2001 dollars since its inception and has increased its debt from $1.7 billion to $4.4 billion over the past five years.  Unlike WorldCom or Enron, Amtrak won't go bankrupt; the railroad will just drain more money from taxpayers and continue to avoid real reform.  Government-backed mortgage giants Fannie Mae and Freddie Mac are two of the largest companies in America, yet they are exempt from the Securities and Exchange Commission's disclosure rules.

The bad players in the private sector usually get their due -- they get fired, go out of business, or go to jail.  But Congress has an ace in the hole that allows them to vote themselves largess, violate their own rules, use taxpayer money as legalized bribery to get themselves re-elected, and never face the bottom line.

Complaints about losses in companies ring hollow when the real accounting deception affects every American as a shareholder in the U.S. government.  While the losses in the private sector are real, at least investors and workers were able to divest or quit when the malpractice became apparent.  Unfortunately, taxpayers don't have a similar choice.

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