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US 2001 Govt Deficit US$515 Billion – Paul O’Neill

In a relative backwater of the US Treasury Website US Treasury Secretary Paul O'Neill makes a startling admission concerning the size of the US Government’s fiscal deficit for the year 2001.

Rather than a surplus of $127 billion as reported, when using the more accurate accrual method the US fiscal position was in fact a deficit of US$515 Billion (NZ$1144 Billion)!

A full transcript of the letter from Paul O’Neill disclosing this remarkable fact follows.

It is worth noting that the New Zealand Government uses the accrual accounting method as a matter of course to present its annual accounts.

Therefore the US Deficit figure of $515 Billion is broadly comparable to our own fiscal results.

Thanks are due to the NY Post for noticing this remarkable admission from Mr O’Neill.

For the source of the following see… http://www.fms.treas.gov/cfs/index.html. Download the full PDF file and look at page 5.


TRANSCRIPT FOLLOWS

A MESSAGE FROM THE

SECRETARY OF THE TREASURY

I am pleased to present the fiscal year 2001 Financial Report of the United States Government. The Report includes audited financial statements that cover the executive branch, as well as parts of the legislative and judicial branches of the U.S. Government. In five years, we have made considerable progress but still have much to accomplish in order to reach our goal of timely and useful financial reporting.

Accrual based financial reporting is critical to gaining a comprehensive understanding of the U.S. Government’s operations. For fiscal year 2001, our results were an accrual-based deficit of $515 billion in contrast to a $127 billion budget surplus reported last fall. (EMPHASIS ADDED) The primary difference between the accrual deficit and the budget surplus is the recognition of expanded military retiree health benefit costs provided by the National Defense Authorization Act, which was signed into law on October 30, 2000, and other actuarial expenses. In fact, these expenses caused the government’s future obligations to its military and civilian retirees to exceed the federal debt held by the public.

As with other future obligations of the federal government, only accrual-based financial reporting provides this information in context to the public. The drive to produce financial reports that better disclose our activities to the Congress and the public continues. This year, for the first time, we are presenting two years of data to facilitate comparative analysis. In addition, we have added two new financial statements.

The Reconciliation of Net Operating Revenue/(Cost) to the Budget Surplus (unaudited) explains the differences between the accrual and budget results. The Disposition of the Budget Surplus (unaudited) explains how the budgetary surplus was utilized.

We have made progress toward the three goals I laid out last year.

- For fiscal year 2004, agencies’ financial statements are due 45 days after the fiscal year-end with the consolidated Financial Report due by December 15 th . This accelerated timing will finally allow adequate time to have the financial statements considered in the budget process. The ultimate goal of the financial information in this report is for it to be used by decision-makers to improve the management and programs of the Federal government.

- After completing our review, we are implementing a new process, developed in consultation with the Office of Management and Budget and the General Accounting Office, for preparing future financial statements which will enhance their integrity.

- The Treasury Department continues to develop a government wide accounting system that will greatly improve the agencies’ access to data, reduce redundant data reporting, and eliminate reconciliations between the cash amounts shown on agency and Treasury books. I believe that the American people deserve the highest standards of accountability and professionalism from their Government and I will not rest until we achieve them.

signed

Paul H. O’Neill

TRANSCRIPT ENDS

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