Governments Engage in Financial Trickery
July 15, 2002
All the attention being paid to private sector balance sheet manipulations is focusing similar attention on the efforts of governments around the world to hide public debt.
To be sure, there are different sets of rules for corporate accounting and governments' national accounts. So rather than try to hide sums outright, governments generally shift them around, postponing and underestimating the final costs.
Here are some examples:
- A London newspaper dubbed Britain's chancellor of the exchequer, Gordon Brown, the "Enron chancellor," after the government guaranteed the equivalent of $14 billion in financing for the country's rail network -- none of which will appear in the royal budget.
- In Japan, the government's consolidated balance sheets omit the assets and liabilities of its troubled public corporations.
- Italy uses sales of asset-backed bonds to reduce its budget deficit -- while excluding the debt from its books.
- Thailand's public debt is officially 60 percent of gross domestic product -- but analysts say that number would actually exceed 70 percent if off-balance-sheet liabilities were included.
Here in the U.S., President Bush and his administration are under attack for using "Enron-like offsets" to lower the perceived cost of a $30 billion-plus emergency spending bill in Congress.
Source: Wade Lambert, Alessandra Galloni and Phred Dvorak, "Governments Push Accounting Boundaries," Wall Street Journal, July 15, 2002.
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