Back in 2017, a story about accounting started to gain national attention. The Department of Defense (DOD) and Housing and Urban Development (HUD) announced that there had been $21 Trillion in federal government transactions that could not be explained or accounted for.
Think about it--$21 Trillion...unaccounted for!
When reporters began to investigate this incredible number, what they found is that the Pentagon’s accounting practices were extremely problematic. It seems as though there has been a practice of creating numbers out of thin air. Their goal, so it seems, was to confuse Congress and the people about what they were actually spending which, in turn, would allow them to spend more and more on defense year after year.
Once this information started to become public, it caught the attention of many high-profile politicians who began to use it as an example of what was wrong in Washington--you know, the “swamp.” One particularly outspoken congresswoman tweeted that with that number, the government could fund the majority of Medicare for all.
While comments like this did draw attention to the important issue, it, unfortunately, missed the point. No one knows if what had been spent was actual money or if the numbers were just completely made-up in order for defense agencies to keep the pipeline of public money open and flowing to them.
Multiple reporters and news agencies tried to have reports released by the government to get to the bottom of these numbers--all efforts resulting in near-zero success. Without more information and transparency in both spending and accounting practices, finding out exactly what is going on with this spending is impossible.
This brings up another, larger point as well. Without being able to see how the government is accounting for spending our tax dollars, our only choice is to trust the publically released accounting numbers which, as you can see, are problematic to the point of being untrustworthy.
And, this is not the only example of the government being guarded and evasive about showing the media and the public the full picture. There have been numerous examples in the last few years alone where crucial information has been withheld or redacted from the public record.
With all this going on, what is the government’s response? Well, the Federal Accounting Standards Advisory Board (FASAB) recommended that the government be allowed to be LESS transparent as long as they state the reason for it is “national security”. It makes you wonder--are most American’s okay with this notion?
In late 2018, this recommendation was accepted and now the government can conceal how they are using almost any public money if they frame it as a national security issue. This even applies to departments such as the Department of Agriculture, HUD, Farm Credit System Insurance Corporation, the Overseas Private Investment Corporation, and many other government agencies that have little or nothing to do with national security.
The upshot is that with this change, the Generally Accepted Accounting Principles (GAAP) are no longer relevant and the way the government spends and accounts for our money will now be in the hands of a few top government officials with little to no oversight and can not be held accountable by the general public for their spending.
While this may seem like a boring accounting issue, it is a lot more than that and also a lot more relevant to many people’s everyday life. This is a dangerous situation that can have massive long-term ramifications for our country’s economy.
Anyone who buys or holds U.S. government bonds now have to be incredibly cautious and worried. These accounting practices not only allow the government to lie about spending but about how much debt they are incurring as well. With the possibility, which had been discussed at the highest level of government, of defaulting on our debt or deflating our currency, these “boring” accounting practices become very relevant to our financial system...and the underlying value of your own personal wealth.