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U.S. Treasury Web Site Reveals $Half-Trillion Deficit
by John Crudele, New York Post, 14 May 2002

Hardly anyone noticed but the Federal budget deficit rose to more than a half-trillion dollars last year. That's not a typo. My typing is just fine.

And that incredible figure comes from no less an authority than U.S. Treasury Secretary Paul O'Neill.

If you've been following the newspapers lately you've probably noticed that Republicans and Democrats have been squabbling over the expected budget surplus that suddenly disappeared. The politicians are also bickering over how this country will manage the sharp increase in Federal spending that will be required in the war on terrorism.

The hand-wringing has been over the fact that the government expected $75 billion more in tax revenues this year than actually arrived. With that revenue shortfall, the federal budget deficit -- the one elected officials are publicly worried about -- will be $121 billion and not the $46 billion upon which projections were made.

Forget all that. That's chump change.

What I've stumbled upon is shocking -- both for the information provided and for the way in which the news was delivered.

Carefully hidden on a Treasury Department Web site is an undated letter from Secretary Paul O'Neill that puts the deficit number last year at quadruple what Congress is worried about. Here are O'Neill's written words in a "Message From the Secretary Of The Treasury:

"In five years, we have made considerable progress but still have much to accomplish in order to reach our goal of timely and useful financial reporting," O'Neill wrote.

He then goes on to explain what's really happening.

"Accrual based financial reporting is critical to gaining a comprehensive understanding of the U.S. Government's operations. For fiscal 2001, our results were an accrual-based deficit of $515 billion in contrast to a $127 billion budget surplus reported last fall," said O'Neill.

Five hundred and fifteen BILLION dollars. That's on a total federal budget of $2.1 trillion.

To put this into perspective, that would be like your family borrowing one in every four dollars its spends. Or, more accurately, it is like you putting one dollar in four on your credit cards and never paying it back.

O'Neill, of course, is a former businessman. And in this day and age of Enron-type accounting tomfoolery it's nice to see at least one public official trying to get the government to practice the honesty that it preaches to companies.

But don't go thinking that O'Neill or Washington really wants you to see this stuff. This letter, I suspect, was simply put on the record so Washington can later deny hiding anything.

As far as I know, this letter was never made public in the conventional way.

And here's what you have to do to find it: Go to, click on "Treasury Bureaus" on the left, then click on "financial management services."

Once you are there, click on "Financial Report of the U.S. Government." Download it. Now go to page 5, which you can only accomplish by fiddling in just the right way with the bar on the right. [Complete report: PDF, 3.2 MB, Message from the Secretary of the Treasury and Management's Discussion and Analysis, PDF, .7MB]

Your search has now led you to the hidden treasures of O'Neill's letter.

Washington, of course, doesn't practice accrual accounting which is the Generally Accepted Accounting Principle used by most honest businesses.

(We'll leave the matter of pro forma accounting and its shortcomings for another column.)

The government manages to make its budget look better by taking the surplus from trust funds like Social Security and using that money to pay current expenses. The Social Security cash is replaced with government I.O.U.s which might -- or might not -- be paid back later. (Also, another column.)

But O'Neill apparently thinks accrual accounting gives a better picture of Washington's financial health, despite the humongous deficit it embarrassingly reveals.

The Treasury Secretary ends his letter by saying, "I believe that the American people deserve the highest standard of accountability and professionalism from their Government and I will not rest until we achieve them."

Well, the Treasury Secretary is going to be a very tired man because honesty just isn't in vogue in Washington.

Copyright © 2002 NYP Holdings, Inc. All rights reserved.
Reprinted for Fair Use Only.

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