Under Article 2, Section 3 of the Constitution, the Founding Fathers indicated the president must brief Congress with information about and recommendations for the union. To me, this tradition represents an act of transparency, yet the president was not transparent about the federal government’s true debt in his State of the Union Address.
President Barack Obama proposed a number of plans and policies in his State of the Union Address and stressed the economy has been improving since the recession. However, Obama didn’t address how his new policies and plans will be paid for or how they will affect the current national debt.
Although I applaud Obama for addressing the financial state of our country and defining middle class economics in his address, by not addressing the nation’s long-term financial issues, the Obama administration and Congress put the middle class at risk.
Because of our government’s vast financial activities and the president’s proposed policies, I encourage the 114th Congress to re-evaluate our fiscal policies to foster a greater sense of government transparency, which is a cornerstone of democracy.
Warren Buffett, like Obama, delivers regular information to his stakeholders. But, unlike Obama, Buffett delivers financial statements. It’s a shame Obama didn’t include hard numbers and statistics about the federal deficit and the government’s debt in his address.
However, even if they were included, these numbers would not be accurate. The federal government, though the largest financial organization in the world with revenues exceeding the combined revenue of the top 15 Fortune 500 companies, does not follow the same accounting rules as businesses and corporations.
Last Congress, Rep. James B. Renacci, R-Ohio, introduced the Federal Financial Statement Transparency Act of 2014. This bill would have taken necessary first steps to increase government accountability when it comes to financial reporting, but unfortunately, this bill sat in committee.
As a CPA with more than 30 years of experience in the field, I understand the importance of truthful accounting and accurate reporting. That’s why I founded Truth in Accounting, a think tank whose mission is to educate and empower citizens with understandable, reliable and transparent government financial information. Over the past four years, TIA has focused on state budgets and their true deficits. As a part of our new federal project, Truth in Accounting has issued a document detailing the history of the State of the Union addresses and the lack of financial transparency provided in these addresses.
TIA has quantified the accurate non-reported debt owed by state governments; debt largely attributed to ballooning pension costs. TIA now reveals the debt discrepancy to be much more severe at the national level.
Federal financial reports list our debt as $18 trillion, but when all of the government’s liabilities are included, the real debt is more than $80 trillion. From our research, TIA has discovered that more than $67 trillion of the benefits promised seniors by the federal government have not been reported on the federal balance sheet. Unlike private sector companies, the federal government does not include all of its liabilities. Hidden liabilities make it impossible for citizens to hold elected officials accountable. Likewise, hidden liabilities make it impossible for elected officials to hold each other accountable.
Obama is right — we need to focus on our values. We need to remember our personal principles, but we also need to remember that the federal government’s accounting principles need to be held to a higher standard. The federal government’s accounting practices are inaccurate, and as a result, the amount of debt reported has been severely understated. I encourage citizens and members of Congress alike to demand truly transparent accounting, on both state and federal level, from our government.
Sheila Weinberg is CEO and founder of Truth in Accounting.