Let’s Solve America’s Accounting Problem – Starting With Build Back Better

Last month the senator Joe manchinJoe ManchinHassan supports filibustering of voting rights On The Money – Brought to you by Citi – Rebuilding better … late than never? Overnight Energy & Environment – Biden publishes master plan PLUS (DW.Va.) called for the Build Back Better infrastructure bill to be free of accounting gimmicks. More recently, Sen. Lindsey grahamLindsey Olin GrahamBiden’s Build Back Better Bill Suddenly Under Serious Endangerment 12:30 pm Report from The Hill – Presented by Mastercard – BBB negotiations reached tense point # 2 Senate Democrat “stunned” by position Manchin on the PLUS Child Tax Credit (RS.C.) called for a “stop of the madness” on the costing of the bill and asked the Congressional Budget Office (CBO) to recalculate the costs of the bill without the budget tricks used to maintain low costs of legislation. These are honorable demands, but they highlight fatal flaws in the way Congress makes financial decisions. Frankly, the federal government is having difficulty with basic accounting.

Poor budget estimates and the short-sighted way our national debt is calculated prevent elected officials from making sound financial decisions. Members of Congress must be held accountable for their decisions. But we, the American people, cannot hold them accountable if we do not know the real short-term and long-term financial consequences of their decisions.

President BidenJoe Biden Florida Man Started The United Robbery For Using Underwear As A Mask In Protest On The Money – Presented By Citi – Rebuild Better… Late Than Never? Overnight Energy & Environment – Biden publishes master plan PLUSThe Build Back Better plan includes attractive and expensive elements, such as reducing childcare costs and tackling climate change. But in order to keep the costs of these programs down, the bill assumes that many of them are temporary, when they will most likely become permanent. When making financial decisions, it is good to know the costs under various scenarios, but CBO limits itself to the circumstances that it can take into account when calculating the estimated costs of the legislation.

Years ago, on behalf of Sen. Mark KirkMark Steven KirkDuckworth announces re-election Brave new world: Why we need a Senate human rights committee Senate majority battle hangs Biden cabinet hopes MORE (R-Ill.), I asked the CBO to calculate the long-term liability created by a bill at the time. CBO officials have said a congressman cannot order an estimate beyond a 10-year window unless the congressman is on the budget committee. Unfortunately, Senator Kirk was not on the budget committee. It is frightening to think that members of Congress are voting on legislation without knowing the true cost. The 10-year window does not paint a picture of the long-term financial consequences of decisions taken by Congress. It’s like driving in a fog at 100 miles an hour.

How can we trust the federal government to determine the real costs of new legislation when it cannot properly calculate the national debt? The figure of $ 29 trillion that is often referenced by elected officials is not the real national debt. This figure does not include unfunded Social Security and Medicare pledges. At the end of fiscal 2020, the federal government owed more than $ 41 trillion in social security and $ 51 trillion in medicare pledges. The true national debt, including interest and all unfunded liabilities, currently stands at over $ 140 trillion.

Just as the CBO’s score for the Build Back Better bill includes unrealistic sunset provisions, the Treasury Department does not view Social Security and Medicare promises as liabilities because they argue that the current law replaces the benefits. Congress essentially views tomorrow as the “expiration date” for benefits that American seniors rely on, because they can pass legislation at any time terminating Social Security and Medicare benefits.

We must stop this madness. When making financial decisions, Congress should use the type of accounting that businesses are required to use. Currently, the federal government, along with all state and local governments across the country, use cash accounting practices in their budget processes. This method of accounting is so unreliable that the Internal Revenue Service (IRS) does not allow a business that earns more than $ 26 million a year to use it to prepare their tax returns.

Instead, if Congress were to use full accrual accounting, the short- and long-term consequences of any legislation would automatically be calculated and taken into account. The change has to start somewhere, so let’s start with the Build Back Better bill. Sense. Manchin and Graham are right that the bill should be free of accounting gimmicks. The Senate is on track to vote on the bill before Christmas, so it is time to act.

Sheila A. Weinberg, CPA, is the founder and CEO of Truth in Accounting, a nonprofit public finance watchdog.

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