Truth In Accounting: A Rallying Cry For True Republicans

I wrote this comment in response to this post.

"The fundamental flaw in this strategy is that the Federal government has a capacity to borrow at a scale far beyond that of any state. It can also do two other things.

The first is - conduct accounting fraud by hiding the true costs of it's many schemes and promises. California is the poster child for this, but the Feds, being larger have even more places to hide dirt. They are also protected by the size of their own lies since seeing them clearly means realizing how much trouble we are in.

The final capacity is much more scary. The government's ability to print money, means they can try to evade their debts and this is what they are doing. Will most people recognise skyrocketing inflation was caused by the government? I doubt it.

If I had one piece of advice it would be to target the concept of corruption and lying. A move to mandate honest fiscal accounting on all levels of government would be the right thing to do. All of the corpses carefully stuffed in government closets and under rugs are being revealed and the stink should be unbearable by election day 2012.

The one thing we have seen is that when the true costs of the government we have are exposed- people want smaller government."

Of course an honest look at government numbers at all levels will will expose lots of people from both parties to all kinds of heat since the growth of the state to this scale has been a decades long bipartisan process involving all levels of government, including the courts. It will also decrease the power to hand out money and favors that seems to have attracted many to politics.While this may be very painful to many Republicans, it will prove fatal to the Democratic party.

I know that accounting seems like an obscure area to many. But that's the way people felt about Madoff's ponzi scheme as well-- untill the checks stopped rolling in.

The rallying cry for 2010 should be -- One people, united against fraud.

Please explore this website and support them if you can.

Pension Tsunami

John McCain came up with a great phrase when he used the term Generational Theft to describe what our government has done.



The above figures only give a clue as to federal liabilities, but cities, states, county governments have trillions in surprise obligations. Officials had a fiduciary duty to estimate the costs of future benefit promises and account for them honestly but in state after state this was not done.

"Actuaries should be able to tell what a promised pension benefit would cost. But if they come up with too big of a number those benefits might not be provided which is bad for the government workers who won't get those benefits and bad for the government officials who will need to come up with some remuneration scheme that they won't be able to defer onto future taxpayers.

In New Jersey benefits were increased across the board for all retirees and active participants by 9% in 2001 which led, along with the Whitman-instituted contribution holidays, to the current decrepit funded status of the plan.

Were I the actuary for the New Jersey plan, I wouldn't be releasing pro forma reports based on assumptions dictated to me by politicians. To avoid getting sued my executive summary would look something like this:

Without significant cash infusions the benefits promised under this plan are unsupportable and the forced liquidation of assets will mean that within five years little more than the employees' own contributions will remain in the plan to fund all benefits. This pension plan will then morph into a true ponzi scheme. Assuming no significant benefit changes the Annual Required Contribution should be at least at $10 billion for 2009 (from the current $4 billion) and increase with inflation.
Maybe this year's annual report* will have some variation of this wording included (on advice of Milliman's and Buck's counsel) but I doubt it. Telling New Jersey officials what they've been avoiding might not get you sued, but it could get you fired. That's why they keep quiet about it."

The site, Pension Tsunami gives one some idea of the scale of generational theft that has gone on. Underfunding, on this scale is the result of far more than a few mistakes or a few bad years in the markets.