Via Accounting Today, WebCPA asks: What’s the difference between Enron and the United States government? As I blogged recently, the federal government cannot get an unqualified audit, so therefore, we do not know that the financial statements of the U.S. government are fairly stated in conformity with U.S. generally accepted accounting principles. Now, this is not new stuff, as we know. (But a look at the audit letter I link to is interesting.)
WebCPA then states:
Congress and American citizens may be comforted to know that the federal government has never had its consolidated financial statements audited, yet it has been chugging along for 228 years without a financial disaster.
But could that go on forever?
The reason it can, and the reason Enron couldn’t is simple: the United States has unlimited recources to draw from due to the fact that it subsists on theft. When Enron had no cash flow, it leveraged itself into insolvency. The party had to end, and it did. The Fed’s party is a continuous all-nighter, and can be financed on the backs of millions of people, through the overseas theft of resources, etc. The government is also exempt from its own laws (note Section 302 of the Corporate Disclosure Laws), and therefore need not be tamed by consequences. This is something you won’t see mentioned nor analyzed in mainstream financial/accounting pieces.
Some interesting numbers from the piece:
He calculated the federal government’s gross debt as of September 2004 at about $7.4 trillion, or about $25,000 for every man, woman and child in the country. If the gap between promised and funded Social Security and Medicare benefits and other unfunded commitments is included, the per capita gross debt rises to $145,000, or about $350,000 per full-time worker.
The GAO report said that material weaknesses, fundamental record-keeping and financial reporting, and incomplete documentation had hampered the government’s ability to report on assets, liabilities and costs, to measure the cost of financial and non-financial performance, to safeguard assets and record transactions, and to operate in an economical, efficient and effective manner.
The report also warned that the federal government has not maintained effective internal controls over financial reporting (including safeguarding assets).
“If a corporation had such a long record of material weakness in its reporting, its stock price would tank,” Walker told Accounting Today. “We don’t have stock … but we do have plenty of debt … . Our financial condition is worse than advertised. We face large, growing structural deficits that we’re not going to grow our way out of, and we need to start making some tough decisions soon in order to get back on the right path.”
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***The reason it can, and the reason Enron couldn’t is simple: the United States has unlimited recources to draw from due to the fact that it subsists on theft.***
Unfortunately this only half the equation. Evidently there are plenty of people content to have their property stolen. The main difference between how a corporation is regarded and how the government is regarded is that people inject a degree of religiosity into their assessment of government. People need to have some outside manufacturer of Good to comfort them. This is the necessary ingredient that allows the takers to take, or else they would be prevented from doing so. Unfortunately the vast majority are just as superstitious as any people in eras past, and as always, ironclad institutions arise to do Good
David Hilary, a Mises reader from New Zealand, tells me that both the Australian and New Zealand governments (which have been running surpluses of late), report their accounts in accordance with GAAP (Generally Accepted Accounting Principles), which I assume are substantially the same as GAAP in the United States.
The European Union has not had its accounts signed off for ten years. When someone had the temerity to point out that thiÅŸs was a problem they were sacked.
This organisation eats 100 Billion of our money every year, much of it going to who knows where. Enron is peanuts in comparison.
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