Minyan Mailbag - Secretary of Treasury
Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.
A MESSAGE FROM THE SECRETARY OF THE TREASURY:
"I am pleased to present the fiscal year 2004 Financial Report of the United States Government, reflecting the Treasury Department's long-standing responsibility and commitment to report on the Nation's finances. Our objective in preparing these consolidated financial statements is to provide the Congress and the public with a reliable, timely and useful report on the cost of the Government's operations, the sources used to fund them, and the implications of the Government's financial commitments. In fiscal year 2004, government revenues were $1.9 trillion, an increase of more than $100 billion over fiscal year 2003 and the first increase in revenues in four years. The net cost of the government's operations was $2.5 trillion, including all accrued costs. Total revenues less operating costs resulted in a net operating cost of slightly more than $615 billion, down from $668 billion last year. The budget deficit for 2004 was $412 billion. The primary component of the difference between the budget deficit and the net operating cost was actuarial expenses associated with post-retirement health care and pensions, and veterans' compensation. Since Treasury issued the first audited government-wide report for fiscal year 1997, we have made great strides in accelerating the timeliness of government financial reporting and improving its reliability. By accelerating the issuance of this year's report to December 15, just 75 days after the end of the fiscal year, we have made much progress towards matching the timeliness of private sector financial reporting. This acceleration is notable this year because 22 of the 24 major departments and agencies completed their audited financial statements by November 15, within 45 days of the end of the fiscal year. In addition, Treasury has just implemented a new reporting system, which compiles information from agency financial statements and is designed to ensure consistency in reporting and compliance with generally accepted accounting principles. These are important milestones in Federal financial reporting, and I am pleased with the progress we have made this year. At the same time, I recognize that we will not benefit from the Report's full value in informing the public and supporting critical decision making until our reporting credibility is unquestioned. As we look toward our nation's financial future, Treasury is dedicated to achieving this credibility."
As far as I am concerned the deficit is $615 billion, not the rosy figure listed above.
Total revenues less operating costs resulted in a net operating cost of slightly more than $615 billion.
Anything else they are hiding?
Right before Paul O'Neill "resigned", he had the audacity to open up to the public the difference between what the government reports in their budget and what is actually accurate from an accounting point of view. At that time he said that despite the reported figures, the actual deficit was "more like $500 billion". This was in the fall of 2002.
The government reports their figures using cash accounting: cash revenues received minus what was paid out. This is what Mr. Snow is reflecting here. But no one thinks this is accurate because it does not reflect borrowing as a decrease in a cash position. Normal accounting procedure is called accrual accounting. This reflects the fact that borrowing has a cost; it is a liability.
You correctly estimate using accrual accounting that the federal budget deficit is between $600 and $700 billion.
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