Thursday, July 2, 2020
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Audit: Army fudged numbers by trillions

A June report from the office of the Inspector General at the US Department of Defense asserts that the US Army cannot account for about $6.5 trillion in spending statements put on the books during 2015, the Reuters News Agency reports.


World War II wing at the Smithsonian National Air and Space Museum (Chris Devers/Flickr CC)

The “forced” adjustments—i.e., creative accounting—rendered the statements useless because “DoD and Army managers could not rely on the data in their accounting systems when making management and resource decisions.” The fact that the Defense Department’s budget is among the biggest chunks of our national budget makes the lack of transparency in how some charter schools keep their books seem like small potatoes.

Federal balanced budget amendment movement has traction

In related news, several states are seeking to hold a convention, under Article 5 of the US Constitution, to add a balanced budget amendment to the nation’s charter.

Citizens for Self-Governance, a Texas-based group with Tea Party roots, says its goal in supporting a convention would be to “impose fiscal restraints” on the federal government and reduce the ability of the federal government to impose term limits.

Two-thirds of the states would need to pass a resolution calling for a convention, and several states have already passed such a resolution. Any changes that come out of that convention would then need the ratification of the legislatures of three-fourths of the states, and I doubt any controversial measure such a convention would propose, including a balanced budget amendment, wouldn’t find at least 13 states in opposition.

People who support the movement for a convention say they want the government to have to follow the same rules as the ideal household: no spending beyond your means. They ignore the fundamental difference between what happens when the federal government spends in a deficit and when families do it, but even families need to manage debt to purchase expensive items like houses or cars.

Imagine if you couldn’t buy a car or house until you had the required money. Or maybe, we could find a few of those trillion-dollar checks the Army somehow lost through creative accounting and give it back to families.

Many conservative politicians and billionaires say deficit spending is like an immoral act.

“It’s immoral for one generation to borrow and spend beyond its means and leave the bill to the next generation,” the New York Times quoted Scott Rogers, the director of the Balanced Budget Amendment Task Force, as saying.

But a sovereign state can print money, assuming a risk of runaway inflation is taken into consideration, and clear its debt at will. Doing so would put our economy in a tailspin, since very few people would be able to buy even the bare necessities, so we won’t do such a thing.

Families can’t print money and have to find other ways to manage their debt, but one thing is similar between deficits in families and government budget deficits: families derive benefits from deficit spending, and government programs, funded by borrowed money—money the government borrows at near-zero interest—provide benefits to Americans as well.

I liken creative accounting with trillions of taxpayer dollars to an immoral act and would like the government to fix this problem, which is real, in our economy and happening right now, before we start trying to change the rules.

A side note about the convention: Such things probably have no rules. In other words, the convention attendees could take it anywhere their hearts desire. But in our history, the conventions have never strayed very far from the agenda.

Voxitatis covers issues related to economics in support of Maryland’s core learning goals in government, including 4.1.4 (The student will evaluate the effectiveness of current monetary and fiscal policy on promoting full employment, price stability, and economic performance), among others; and in support of the Illinois Learning Standards for Social Science, including SS.EC.6.9-12 (Use data and economic indicators to analyze past and current states of the economy and predict future trends) and SS.EC.FL.2.9-12 (Explain how to make informed financial decisions by collecting information, planning, and budgeting), among others.

Paul Katula is the executive editor of the Voxitatis Research Foundation, which publishes this blog. For more information, see the About page.

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