Government accounting tricks

An unpopular truth

[Reprinted from Issues & Views May 20, 2002]

The Enron case made headlines because fraud and deception of such magnitude is fairly unusual in the corporate world. Washington fraud and deception of a much greater magnitude doesn't make the headlines because fraud and deception in government is standard practice. That's what's so disgusting when politicians posture and demand that something be done to ensure honest corporate accounting practices.

You say, "Williams, what are you talking about--Washington fraud?" Suppose a company had run up debt that it wanted to conceal from its stockholders, lenders and the Security Exchange Commission (SEC). The CEO comes up with the accounting gimmick of transferring money from its employees' retirement account to the company's budget account. That way, when auditors come around, the books are balanced showing no debt. While the company's books are balanced, the company's debt has not disappeared. It still has debt. It's just owed to a different group of people: its employees. If a CEO commits this kind of fraud and deception, he should be summarily jailed.

Washington politicians have for decades been doing precisely what Enron has been accused of doing--concealing debt with accounting tricks.

Enron used accounting gimmicks to hide debt and make corporate executives look good and earn fat bonuses. Congress does the same thing. Each year, it transfers vast sums of money from the Social Security and the Federal Highway trust funds to hide debt, and they boastfully lie to us saying they've not only balanced the budget but created a surplus.

Corporations employ accounting practices promulgated by the Financial Accounting Standards Board (FASB) that established Generally Accepted Accounting Principles (GAAP). Government accounting practices don't come close to the honesty of private accounting practices.

-- Walter Williams, syndicated columnist and Professor of Economics at George Mason University, Fairfax, VA. He is author of The State Against Blacks, (McGraw-Hill), and several anthologies of his syndicated columns, which include: Do The Right Thing: The People's Economist Speaks (Hoover), All It Takes Is Guts: A Minority View (Regnery), and More Liberty Means Less Government: Our Founders Knew This Well (Hoover).
(Creators Syndicate)

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