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How Bad Are Uncle Sam’s Books?

Tuesday March 15th, 2016   •   Posted by Craig Eyermann at 6:32am PDT   •  

gao-logo The question is answered by the reporting of the Daily Caller News Foundation‘s Kathryn Watson:

Uncle Sam’s financial statements are so bad the Government Accountability Office (GAO) flunked him for the 19th year in a row.

The Department of Defense, Department of Housing and Urban Development, and Department of Agriculture have books in such bad shape coupled with the country’s out of control debt and spending, that GAO “did not render an opinion on the federal government’s consolidated financial statements,” it said Monday.

The current U.S. Secretary of Defense, Ashton Carter, has been on the job for just over a year, the current Secretary of Housing and Urban Development, Julián Castro, has been on the job for nearly two years (since mid-2014), and the current Secretary of Agriculture is Tom Vilsack, who has been in office for over seven years.

But why is not having accurate financial statements a bad thing?

Aside from representing a failure of leadership, the poor record keeping of the financial condition of government departments means that they really don’t know what assets they have, so they are extremely likely to waste money on buying things for which they have no clear need. Beyond that, they also risk defaulting on payments due to those businesses with whom they do business, because they don’t know what bills they may have either paid or have coming due.

That latter situation opens the door to further waste because it creates an opportunity for criminals seeking to defraud the government for services or products they never provided nor delivered.

If the situation were more contained, it would be less of a concern. But with the situation so out of control for so long, it creates an additional risk for the U.S. government, because it increases the risk that it will default on its payments during periods of distress because it doesn’t have the same margin of safety it did when the national debt was lower. The U.S. Comptroller General, Gene Dodaro, explains:

“Growing debt held by the public, which is now about 74 percent of the Gross Domestic Product could limit the federal government’s flexibility to address new or unforeseen challenges, such as another economic downturn or a large-scale disaster.”

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March 2016