With state and local governments scrambling to meet the Government Accounting Standards Board’s (GASB) amended rules for reporting on postretirement benefits, and private and public companies getting ready for compliance with the Financial Accounting Standards Board’s (FASB) proposed statement on recording pension liabilities, a congressman from Indiana has introduced legislation that would require the federal government to meet a similar standard. The Truth in Accounting Act, sponsored by Rep. Chris Chocola (R-Ind) and co-sponsored by Reps. Jim Cooper (D-Tenn) and Mark Kirk (R – Ill), would require the federal government to accurately report the nation’s unfunded long-term liabilities, including Social Security and Medicare, a debt that amounts to $43 trillion dollars, during the next 75 years, Chocola says, according to wndu.com.
The U.S. Treasury Department is not currently required to file an annual report of these debts to Congress, wndu.com says.
“When I was in business, the federal government required our company to account for long-term liabilities using generally accepted accounting principles,” Chocola told the South Bend Tribune. “This bill would require the federal government to follow the same laws they require every public business in America to follow. If any company accounted for its business the way the government accounts, the business would be bankrupt and the executives would be thrown into jail.”
The legislation doesn’t propose solutions for the burgeoning liabilities, but it takes a crucial first step, according to Chocola, “by requiring the Treasury Department to begin reporting and tracking those liabilities according to net present value calculations and accrual accounting principles,” the Tribune reports.
“In order to solve our problems and prevent an impending fiscal crisis,” Chocola said, “we have to first identify where and how large the problem is.”
Chocola clearly sees a looming fiscal crisis. “Congress is the Levee Commission and the flood is coming,” he told the Tribune. “This [bill] is intended to sound the warning bell.”
To support his position, according to the Tribune, Chocola referred to an article written by David Walker, a Clinton appointee who serves as Comptroller General of the United States and head of the U.S. Government Accountability Office (GAO). Walker wrote that the government was on an “unsustainable path”.
Speaking to a British audience last month, Walker said that the U.S. is headed for a financial crisis unless it changes its course of racking up huge deficits, Reuters reported. Walker said some combination of reforming Social Security and Medicare spending, discretionary spending and possibly changes in tax policy would be required to get the deficits under control.
“I think it’s going to take 20-plus years before we are ultimately on a prudent and sustainable path,” Walker said, according to Reuters, partly because so many American consumers follow the government’s example. “Too many Americans are spending more than they take in and are running up debt at record rates.”