On June 24-25 I made a quick trip to Nashville for the Association of Government Accountants Professional Development Conference. One of the highlights of my trip was a keynote address by Bethany McLean, author and senior editor of Fortune. She gave the audience a perspective of the Enron story five years after its spectacular collapse into scandal and bankruptcy.
I couldn’t write down the parallels to federal government accounting fast enough. Ms. McLean stated that the Enron executives stole from the future until there was nothing left. She said that the prosecutors’ strategy was not about the numbers, but the lies and choices. The executives at Enron choose to lie. They said that the business was in great shape. They never gave the investors the truth about the numbers. They may have followed the accounting rules, but not the spirit of the rules.
You can find other quotes that parallel what the government is doing at: http://www.truthinaccounting.org/McLean_comments.html
Ms. McLean pointed out that the Enron board said that they were lied to. That may have been true, but there were a lot of obvious questions that they didn’t asked. For example, Where was the money coming from? How could it be that the income statement showed large profits, while there were large negative cash flows, including a great deal of borrowings? Another point she made was that even though Ken Lay may have not known the specifics of the accounting smoke and mirrors, it was his job, as the leader of the company, to provide vision and integrity.
When Ms. McLean was finished with her talk I asked her in front of the 1,800 government accountants in attendance, if she had considered writing a book about the federal government and Congress. Listening to Ms. McLean’s description of the Enron’s shenanigans and attitudes, I see the federal and state governments heading down the same road. In fact I think that the federal government and many state governments would already be there, if they didn't have more venues to borrow money, the world, and a larger investor pool, the U.S. taxpayers.
When financial crisis does happen, I predict that the American public will say that they were lied to. This is true. They are told that the Social Security trust funds will last for decades to come. The budget numbers are not related to reality.
But there are a lot of obvious questions that the American people are not asking, because they don’t want to jeopardize their government services and benefits or pay higher taxes. Where is the money going to come from to pay for the hundreds of billions of dollars of deficits where are running? The public knew that the government was in debt, but did not ask how we are going to fund the new prescription drug program. How could we have had surpluses, while the federal debt was increasing? Now only a few people are asking, how we can be cutting taxes, while we are paying for an expensive war?
Instead of focusing on Paris Hilton the Americans should focus on the truth about their governments financial conditions. The truth can be found in our publications, like the Financial State of the Union and Political Math and the Illinois Budget.
Just like Ken Lay, the President and members of Congress should be providing the country with vision and integrity. Instead they are using smoke and mirrors to hide the truth about our country’s financial condition.