Jim Cooper and the National Debt

Cooper says the Congress hasn’t been truthful with the American people about the actual size of the federal deficit. The problem, says Cooper, is that the government isn’t taking into consideration its rather massive future obligations when planning annual budgets. In short, federal accounting procedures are misleading.

“What is going on in the federal government needs to be brought out in the open so taxpayers know the truth about the federal deficit,” Cooper said. “The federal government is keeping two sets of books but they only want taxpayers to see one of them. I think it is time to make the government budget the same way they make American businesses operate.”

What Cooper wants us to know is that the President’s budget, and the subsequent Congressional budget, is based on cash accounting which ignores future commitments to retirees, the sick and the disabled.

But the “Financial Report of the United States,” issued by the Department of the Treasury, uses accrual-basis accounting. And under federal law, accrual accounting is required of all businesses with revenues of $5 million or more. This method considers future obligations and presents a clearer, more reliable picture of a company’s – or the government’s – financial liabilities.

So what’s the difference in real terms? Rather massive.

According to the Budget, the deficit was $319 billion in 2005. Meanwhile, the Financial Report says it was $760 billion, or more than twice as large.

That raises some rather obvious questions. Why is this allowed to continue, and why don’t we know more about it?

Unlike the Federal Budget, which is widely distributed to every member of Congress and the media when it is released by the President, the Financial Report is virtually hidden. It is distributed to fewer than 20 members of Congress and is released in the midst of the Christmas holiday season with no accompanying press release or media announcement.

This big secret has the potential to be very damaging to the U.S. According to David Walker, Comptroller General of the United States, the path we’re on is “unsustainable,” and could even threaten our national security.

How? Because the outsized federal debt forces our government to borrow ghastly amounts of money from other nations to continue functioning.

“We are the richest nation on earth, yet we have to borrow $1 billion everyday from foreigners just to get by,” says Cooper.

What that means is that in 2009, our nation will be spending more money in interest payments to our bondholders than to our own citizens on non-defense, discretionary spending. That means less money for highways, parks, schools, student loans, research, agriculture, law enforcement, etc.

For the first time since World War II, our creditors will be getting more of our tax dollars than our own citizens. And for the first time since the American Revolution, most of those new creditors are foreign. Japan and China alone hold over $900 billion of our national debt.

At present, we are burdened by the largest budget deficits in our history – $412 billion of red ink in 2004 – and more and more money is being spent just to service our $7.75 trillion debt. The first trillion dollars of that debt was accumulated over 204 years; now we are adding a trillion every two or three years.

Cooper says the U.S. is borrowing money “like drunken sailors.”

When the effects of this negligence finally rear their ugly head, President Bush will be out of office and the problem will fall squarely into the lap of his successor. Who’d want to inherit that mess?

Anyone who has ever purchased U.S. Treasury bills, notes, or bonds is supporting the national debt by lending money to the government. In return, they are promised interest on those loans. Many U.S. citizens are among them, as are U.S. banks and mutual funds. But foreign governments are also owed vast sums by our government, and someday those debts will have to be paid. And if other governments ever stop lending us money, interest rates could spike, potentially crippling our economy.

This worries Cooper. “We are the richest nation in the world, but we are begging poorer nations so that we can maintain our lifestyle,” he says.

The U.S. cannot afford to default to its creditors. In our history we never have, and our standing in the world would be jeopardized if we ever did. But it is a nightmare that has the Congressman concerned.

The way he sees it, the U.S. is digging itself a hole everyday, and what’s worse, we’re “using a power shovel.” The 2003 Medicare drug bill alone added $8.1 trillion to our nation’s unfunded obligations. Cooper says the bill is twice as big a financial problem for the U.S. as all of Social Security. And it could require even more borrowing from the Chinese and other foreign governments.

Believing that Congress needs to adopt a number of long-overdue changes, earlier this year Cooper introduced two separate bills urging Congress to consider accrual and long-term budgeting when planning next year’s federal budget. Cooper introduced a similar amendment in the House Budget Committee in March. It received unanimous approval by the full House but was removed from the budget resolution in conference with the Senate. Go figure.

The recommendations of the two-term Congressman seem rather reasonable and straight forward; Congress needs to know what each law costs, record votes on major expenditures, and ban new programs unless they are paid for.

How or why any of his peers could oppose these much needed changes is unconscionable, and that they’ve operated without them all these years is irrational. But then again, that’s government, isn’t it?

Cooper needs to be credited for bringing this issue to light, and for trying to restore budget discipline. Americans should be thankful.

“If we don’t start living within our means, we will not have the means to live. We will depend on the charity of our bondholders, not the strength of America’s citizens,” contends Cooper.

Copyright Ã?© 2006 Sean M. Kennedy. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without the author’s consent.