In case you didn’t see through the thinly veiled references, yesterday’s column was talking about the federal government. I asked in an earlier entry, after Congress gave itself a generous pay increase, whether the government should be run like a business. Now, with it expanding beyond all reason, doing things that it was never supposed to do, we come back to that question: Should the government be run like a business?

Lies, Damned Lies, and Statistics

Mark Twain said it best, “There are lies, damned lies, and statistics.” The US government has certainly proven that point. In addition to voting themselves pay increases, Congresses and Administrations through history have played fast and loose with information that would have likely affected their ability to remain in power. These include:

·        During the Kennedy administration, unemployment was redefined with the concept of "discouraged workers" so as to reduce the popularly followed unemployment rate.

·        If Lyndon Johnson didn't like the growth that was going to be reported in the GNP, he sent it back to the Commerce Department, and he kept doing so until Commerce got it right. The Johnson administration also was responsible for gimmicking the accounting that hides most of the federal deficit.

·        Richard Nixon had a highly publicized war with the Bureau of Labor Statistics on the unemployment data. Nixon wanted to report the unemployment rate as the lower of the seasonally adjusted or unadjusted number, at any given time, but not specify same to the public. While that approach was unconscionable at the time and never used, basically the same methodology was introduced in 2004 as "state-of-the-art" by the current Bush administration.

·        The Carter administration was caught deliberately understating inflation.

·        Systemic changes were introduced during the Reagan administration to boost reported GNP/GDP growth on a regular basis. The wildest manipulations, however, happened at the time of the 1987 liquidity panic. In addition to intervention in the futures markets by the New York Fed to help prop the stock market after the October 19th crash, direct and heavy manipulation of the trade deficit data, under the direction of the Federal Reserve and U.S. Treasury, was used in conjunction with massive currency intervention to help bottom the dollar and to contain the currency panic at year-end 1987.

·        The first Bush Administration began efforts at the systematic reduction of the reported rate of CPI inflation, and worked an outside-the-system GDP manipulation aimed at helping with the failed 1992 reelection bid.

·        As former Labor Secretary Bob Reich explained in his memoirs, the Clinton administration had found in its public polling that if the government inflated economic reporting, enough people would believe it to swing a close election. Accordingly, whatever integrity had survived in the economic reporting system disappeared during the Clinton years. Unemployment was redefined to eliminate five million discouraged workers and to lower the unemployment rate; methodologies were changed to reduce poverty reporting, to reduce reported CPI inflation, to inflate reported GDP growth, among others.

·        The Bush administration expanded upon the Clinton era initiatives, particularly in setting the stage for the adoption of a new and lower-inflation CPI and in further redefining the GDP and the concept of seasonal adjustment.

·        There is no Social Security “lockbox” or anything else that keeps the money out of the general funds of the government. You invest your money but that goes to pay retirees that are higher up on the line. When you begin to collect, it will be young workers, forced to invest in this, who will pay you. This is a pyramid scheme, plain and simple.

The effect of all this monkey business with important societal statistics? From the point of real decision-making, especially when that decision could help or hurt a given officeholder, candidate or party; they are practically useless. Kennedy redefined unemployment so he could report lower numbers, Reagan boosted the GNP and GDP figures to make it look as if there was greater prosperity than there really was.

Both sides do it, not by cooking the books, but rather by redefining terms and adjusting procedures. Now, with the national books in ruins, America’s CEO is about to sign into law something that only he and his immediate supports want, his nearly $800 billion stimulus package. No one has actually read the thing, Congress voted it in and now it is on the President’s desk ready to be signed into law. The numbers in it, of course, are just as inaccurate as the basic data they are derived from.

The True Cost of Stimulus

Let us consider just one aspect of the bill, the price. You would think that the cost of President Obama’s stimulus bill would be easy to figure out. After all, they are the ones coming up with the numbers in the first place, right?

Not so fast! The cost of it all really depends on how you look at it. From a strictly cash point of view, it is the advertised $787 billion. At least they are keeping it to under a trillion. Wait, what if we add in interest? You see, a lot of that money is being borrowed. The Congressional Budget Office estimates $347 billion in interest over the next decade. That brings the total cost for this bill to $1.134 trillion.

The True Cost of Government

There has been a great deal of hand-wringing and complaint from both sides of the aisle that the deficit would be made so large by this bill that it would be out of control. That is the good news, they recognize that there is a problem. The bad news is that the deficit is already out of control.

If you calculate the deficit on a cash basis, you come up with the official $455 billion figure floating around the media. However, there are two ways of calculating the federal deficit. There is the cash basis method and there is the Generally Accepted Accounting Practices Method (GAAP). GAAP, which the government has been using for several years now, includes the year-for-year changes in the net present value of unfunded liabilities in social insurance programs such as Social Security and Medicare. Their cash accounting method does not.

The results, of course, are somewhat different. Cash accounting gives us a deficit of $455 billion. GAAP accounting brings that up to $5.1 trillion, and that is before we add in any of the TARP program money, the bailouts or the economic stimulus plan. Given the sheer volume of money involved, no form of taxation would be able to tame this fiscal monster.

The Bottom Line

Any business that became so bloated, so financially overextended, would find itself before a bankruptcy judge. It would be forced to reorganize, to shed itself of extraneous activities, to pay off its debts and live within its means. It’s leadership would likely be removed and new leaders appointed, who would bring the company back to solvency under the guidance of a trustee or the judge himself.

Today, America has a new CEO and he and his executives are continuing the same big spending, data manipulating, policies that brought us to ruin in the first place. As the stockholders of this nation, we expect our executives to act in our best interest. They have not been doing so for a very long time, and from the first actions of our new CEO, things don’t seem to be changing.

2010 will be here before we know it, and when those midterm elections finally arrive, the stockholders of America should clean house. Them, perhaps, we will see some of that change we can believe in.