Jul 20, 2006
Press Release

- current budget process ignores long-term, future obligations; introduces
legislation to require Congress to adopt standard business accounting methods

WASHINGTON - U.S. Rep. Jim Cooper is urging Congress to start talking honestly about the federal deficit first by admitting that the current budget process uses accounting procedures that ignore long-term, future obligations.

"What is going on in the federal government needs to be brought out in the open so taxpayers know the truth about the federal deficit," Cooper said. "The federal government is keeping two sets of books but they only want taxpayers to see one of them. I think it is time to make the government budget the same way they make American businesses operate."

According to Cooper, the "President's Budget," issued by the Office of Management and Budget and used by Congress to develop the annual budget, is based on cash-accounting. The "Financial Report of the United States," issued by the Department of the Treasury, uses accrual-basis accounting. Federal law requires all businesses with revenues of $5 million or more to use accrual accounting. The Financial Report and accrual accounting take into account future obligations of the federal government, presenting a clearer, more understandable picture of federal finances.

"General Motors, Ford and the United States are doing well financially if you use cash accounting," Cooper said. "Under accrual accounting, however, all are in serious trouble, primarily due to promises made to retirees, the sick and disabled.

"Cash accounting ignores these vulnerable people and the commitments we've made to them," Cooper added. "Accrual accounting remembers them and our financial liabilities."

What difference does it make to taxpayers?

The Budget says the deficit was $319 billion in 2005 while the Financial Report says it was $760 billion, or over twice as large.

David Walker, Comptroller General of the United States, has been clear on the question of cash basis accounting. "Continuing on this unsustainable path will gradually erode, if not suddenly damage, our economy, our standard of living, and ultimately our national security."

In order to give taxpayers a truer measure of America's financial status, Cooper just introduced two separate bills that urge Congress to consider accrual and long-term budgeting when planning next year's federal budget. Cooper introduced a similar amendment in the House Budget Committee in March. It received unanimous approval by the full House but was removed from the budget resolution in conference with the Senate.

While the Federal Budget is widely distributed to every member of Congress and the national media when it is released by the President, the Administration does little to bring attention to The Financial Report. It is distributed to fewer than 20 members of Congress and is released in the midst of the Christmas holiday season with no accompanying press release or media announcement.

"We can't fix our deficit problem if we don't acknowledge a problem exists," Cooper added. "Considering accrual accounting is an important first step."