Late Friday was also the occasion for the release by the Treasury Department of the "2009 Financial Report of the United States Government." The report shows how seriously the government's financial situation deteriorated during the fiscal year that ended September 30. The coverage of the report prepared by the Associated Press's Martin Crutsinger demonstrated how weak the press's communication of that seriousness is.
After presenting the first several paragraphs of Crutsinger's composition for the purpose of providing the basic facts, I'll concentrate on the AP writer's three worst paragraphs that followed (there is also a summary table from the report at the end of this post):
Report shows government's liabilities surging
The federal government fell further into the red in 2009, with its financial position hitting a deficit of $11.46 trillion.
That figure is 12.3 percent higher than the previous year, according to a new report issued by the Treasury Department on Friday.
The annual report shows that the government's big entitlement programs such as Social Security and Medicare are facing a deficit over the next 75 years of $45.88 trillion, an increase in that deficit of $2.9 trillion in just one year.
The $11.46 trillion deficit in the government's net financial position in 2009 represents an increase of $1.25 trillion over 2008. The position reflects the government's assets, such as cash, property and investments, minus liabilities, such as the federal debt held by the public.
Here is the first of Crutsinger's three worst subsequent paragraphs:
Under the cash accounting system, the federal budget deficit for 2009, the budget year that ended on Sept. 30, soared to an all-time high of $1.42 trillion, surpassing the previous record of $454.8 billion set in 2008.
The trouble is the government isn't using a purely "cash accounting system" in its routine reports.
One might be tempted to give Crustinger a pass on this, because Treasury made no effort to elaborate on what "prepared primarily on a 'cash basis'" (the description on Page 7 of the 254-page Financial Report) means. But he doesn't deserve one, because he was around when Treasury made a huge adjustment last April to previously released information from October 2008 through March 2009 that moved it away from "cash basis" in one critical area. In fact, he reported it on May 12, 2009:
However, the Obama administration said it was changing the accounting process to a "net present value" basis, which means it assumes that the government is getting an asset when it provides loans to the banks and auto companies. Based on the new accounting method, the size of the deficit from October through March fell about $175 billion.
If this change hadn't been made, fiscal 2009's reported deficit on a purely cash basis would have been at least $200 billion higher.
Here's Crutsinger's second weak subsequent paragraph:
The deficit surge reflects a deep recession that has cut into tax revenues and boosted spending on such programs as unemployment insurance and economic stimulus packages.
Beyond the fact that Crutsinger's article at various points uses the word "deficit" to describe three very different things (negative net worth, accumulated actuarial obligations, and annual differences between receipts and outlays), more than likely leaving many readers hopelessly confused, the AP writer acts as if this inanimate thing known as "the deep recession" somehow "boosted spending," even on the stimulus, all on its own. Uh, not exactly. Setting aside the issue of effectiveness or lack thereof, Congress and the Obama administration "boosted spending" on economic stimulus in response to the recession, and for that matter passed and signed off on spending programs in general.
The final weak paragraph concerns Crutsinger's characterization of the Government Accountability Office's report on the government's financial statements:
The General Accountability Office, the auditing arm of Congress, said it could not sign off on the government's books because of serious financial management problems at the Defense Department and other financial shortcomings.
Crutsinger got the first word in the agency's name wrong, but far more importantly, he mostly whitewashed what it had to say, as you can see from the first four paragraphs of its related press release (the full letter to the President, the Senate, and the Speaker of the House in PDF form is here):
Weaknesses Evident in Financial Management as Nation Confronts Long-Term Fiscal Problems & Financial Regulatory Weaknesses
The U.S. Government Accountability Office (GAO) could not render an opinion on the consolidated financial statements of the federal government (other than the Statement of Social Insurance) because of widespread material internal control weaknesses and other limitations.
“While financial management has improved significantly since the government began preparing consolidated financial statements, for the 13th year in a row now shortcomings in three areas again prevented us from expressing an opinion,” said Gene L. Dodaro, Acting Comptroller General of the United States. “I’m referring to serious financial management problems at the Department of Defense (DOD), the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between agencies, and the ineffective process the federal government uses to prepare the consolidated financial statements.”
Dodaro also cited material weaknesses involving improper payments estimated to be at least $98 billion, information security across government, and tax collection activities. He noted that four major agencies—DOD, the Department of Homeland Security, the Department of State, and NASA—did not get clean opinions.
The material weaknesses discussed in GAO’s audit report hinder the government’s ability to (1) reliably report on many of its assets, liabilities, and costs; (2) accurately measure the full cost as well as the financial and non-financial performance of certain programs and activities; (3) adequately safeguard significant assets and properly record various transactions; and (4) have reliable information to operate efficiently and effectively.
Although DOD was the largest department that failed to get a clean opinion, it clearly wasn't the only one; Crutsinger clearly misled readers into thinking it was. Additionally, his characterization of what GAO referred to as "widespread material internal control weaknesses," "serious financial problems," and a huge amount of "improper payments" as mere "financial shortcomings" significantly downplays a very ugly reality. At the very least, the AP reporter could have put the word "shortcomings" in quotes and mentioned that the government has never received a clean audit opinion.
The combination of the government's convenient late Friday release and Crutsinger's awful reportage will work to ensure that the most of the public will continue not to comprehend just how dangerously out of control Washington is.
For those who can't carve out the time to wade through hundreds of pages, here is a summary table from the Financial Report capsulizing the continuing calamity:
Cross-posted at BizzyBlog.com.