AP Blows The Deficit Reporting, Part I: The $175 Billion (Yawn) Accounting Change
You have to see this to believe it, and even then you'll have a hard time believing it. It's the Obama administration's deficit reduction program, otherwise known as "change the accounting."
Here is what the Monthly Treasury Statement (MTS) from Uncle Sam looked like in March:
Here is the report for April:
Shazam! The government just made about $175 billion in deficits disappear (March's reported $956.8 billion compared to April's $781.4 billion through March).
Surely they jest, right? Nope.
Surely this manipulation of the government's cash reporting is front-page newsworthy, right? Not at all.
Tuesday, the AP's Martin Crutsinger gave it the "no big deal" treatment, virtually ensuring that broadcast and news outlets who rely on AP reports would pay it little heed. The AP reporter also left readers hanging as to whether the White House's predicted deficit of $1.84 trillion is before or after an "accounting change," one that will leave many readers here shaking their heads:
Gov't runs April deficit for first time since '83
The federal government ran a deficit in April for the first time in 26 years, pushing the red ink so far this budget year to a record $802.3 billion.
The Treasury Department said Tuesday the deficit for April was $20.9 billion, a sharp contrast from the surplus of $159.3 billion in the same month last year. It also was slightly more than the $20 billion deficit economists had expected.
For the budget year that began Oct. 1, the imbalance totals $802.3 billion, keeping the country on track to register the first $1 trillion annual deficit in U.S. history. And the Obama administration made an accounting change on bailout payments or the deficit already would have been at nearly $1 trillion.
The administration on Monday raised its deficit estimate for the year to $1.84 trillion, from the $1.75 trillion it estimated less than two months ago.
The administration made revisions to the deficits reported from October through March to reflect a change in how it was accounting for the bailout payments. The Bush administration recorded each payment to a bank or auto company getting bailout support on a dollar-for-dollar basis.
However, the Obama administration said it was changing the accounting process to a "net present value" basis, which means it assumes that the government is getting an asset when it provides loans to the banks and auto companies. Based on the new accounting method, the size of the deficit from October through March fell about $175 billion.
Three quick points:
- Crutsinger had nothing to say about what the April deficit would have been under the prior accounting method, whether the government even disclosed it, or even intends to disclose it for April or future months.
- The Monthly Treasury Statement has always been a cash flow statement. Excluding real outlays because their purpose was to buy assets (very questionable ones, but that's beside the point at the moment) profoundly violates cash-flow reporting principles. If you have $21,000 in your checking account and pay cash for a $20,000 car, you can't run around pretending you didn't spend $20,000 to acquire the car. That's exactly what Treasury is doing with its TARP related adjustment.
- The AP reporter did not tell us whether the administration's revised deficit forecast of $1.84 trillion uses the old method or the new method. If it uses the new method, that would mean that the deficit using the more conceptually correct old method will be well over $2 trillion, a huge jump from the prior $1.75 trillion. Crutsinger leaves us totally hanging, and seems oddly incurious.
Even calling this Treasury maneuver an "accounting change" overdignifies what is being done. It's a gimmick that threatens to turn this and other routine reports into indecipherable gibberish.
Maybe that's the point.
Part II ("The Invisible April Receipts Dive") is here.
Cross-posted at BizzyBlog.com.