Looking Without Seeing

He said, "Go and tell this people: 'Be ever hearing, but never understanding; be ever seeing, but never perceiving.' Make the heart of this people calloused; make their ears dull and close their eyes. Otherwise they might see with their eyes, hear with their ears, understand with their hearts, and turn and be healed."

Then I said, "For how long, O Lord?"

And he answered: "Until the cities lie ruined and without inhabitant, until the houses are left deserted and the fields ruined and ravaged, until the LORD has sent everyone far away and the land is utterly forsaken. Isaiah 6:9-12 NIV

In this most modern of countries, America, a plague ravages the land. Slowly at first, stores close their doors, neighbors lose their jobs, and random houses are emptied, abandoned and lifeless. Not because of any biological plague, instead America's cities suffer from an economic plague, a quiet plague that leaves people robbed and ruined. This is a plague of lies by accounting, numbers on a balance sheet manipulated by the federal government to show whatever it wants, promising people something for nothing, keeping them docile and waiting for the next government vaccine, all while they hope to avoid their neighbor's fate. The plague of lies is spreading, leaving more people unemployed, relying on charity for food and shelter, and losing hope.

How could this happen? We have access to vastly more information than any who have come before us. We see, we hear, yet we do not perceive.

"Accounting fraud at Enron is such a big story because it is so exceptional; only once in a blue moon does a major corporation destroy itself in this way. In contrast, “accounting” fraud is an inherent feature of government." Thomas DiLorenzo, "Real Accounting Fraud" [1]

Enron is synonymous with corporate dishonesty. Enron executives pretended to follow generally accepted accounting principles (GAAP), but used special purpose entities to hide liabilities and overstate the company's equity.[2] Investors lost nearly $45 billion in Enron and some executives went to prison for fraudulent accounting practices.[3] Most people won't forget the infamous Enron accounting scandal of 2001.

Why doesn't the news media ever mention a more blatant and worse accounting scandal that has been going on since 1968?

Our federal government, quick to prosecute Enron executives, doesn't even pretend to follow the GAAP standard, and is in a financial hole 1000 times deeper than Enron ever was. Estimates for federal government liabilities are as high as $65 trillion. But unlike the Enron accounting fraud, this time there won't be any trials.

Taxpayers, the "investors" in the US government accounting fraud, will pay with higher taxes, a stagnant economy that jeopardizes their incomes, and inflation that robs their savings. Instead of prosecutions, the federal government bails out wealthy executives, and "chastises" them by limiting their annual compensation to under $10 million.[4][5] Meanwhile, the vast majority of Americans will continue to support the federal government as it grinds them into the ground, all the while believing federal government lies that the government makes our lives better. All this is happening now before our eyes. Yet we make our ears dull and close our eyes.

John Williams' Shadow Government Statistics site reports on federal government lies about economic statistics. The federal government misrepresents unemployment and inflation rates, and minimizes the annual budget deficit. As they see their paychecks shrinking, houses abandoned, and businesses closing, most people know things are worse than the government reports. But the media and Americans continue to ignore the truth: federal government profligacy is destroying America. "...the cities lie ruined and without inhabitant, until the houses are left deserted and the fields ruined and ravaged..."

Since the Johnson administration, when LBJ created his "Great Society," the biggest "something for nothing" program since the New Deal, the federal government has used an accounting gimmick called "unified budget accounting" to misrepresent the size of the federal budget deficit.[6] For the last 40 years the federal government has consistently spent more money than it takes in, trying to hide the fact by using unified budget accounting rules that ignore off-budget spending.

Today people still believe that the Clinton (D) administration ran a budget surplus from 1998 to 2000. The government tells them so, using its unified budget accounting scheme to define a surplus as the amount by which "on-budget" federal revenues exceed outlays for a given fiscal year. What the government doesn't tell them is that the "on-budget surplus" excludes spending and revenues for the off-budget Social Security Trust Fund, Medicare, Postal Service, and pension funds. But if people looked at historical data available from the government, they would see that it shows the gross federal debt has increased every year since 1969. There has never been a surplus since then, no matter what the news media and then-President Clinton would have people believe.

In this decade, deficits have been so huge that the federal government doesn't even pretend to run a surplus. But it still can lie about the size of the shortfall: the annual deficit is much worse than Congress and the President profess. According to the GAAP standard used by private corporations, the 2008 US treasury report (pdf) for the last year of the Bush (R) administration showed an increased gross debt of $997.7 billion and liabilities of $4.1 trillion for an approximate $5.1 trillion total debt. Yet the unified budget reported a deficit of $454.8 billion. To further insult us, the Obama (D) administration told us we needed a stimulus program of increased federal spending as our latest vaccine.

The unified budget deficit reported for the first year of the Obama administration in 2009 is three times higher than in 2008: $1.417 trillion. The GAAP version of the deficit will be higher still.[7]

For how long can this continue? Until we either see with our eyes, hear with our ears, understand with our hearts, turn, and are healed, or until the land is utterly forsaken.

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[1] "Real Accounting Fraud," The Free Market, April 2002; Volume 20, Number 4, by Thomas J. DiLorenzo, (Accessed at http://mises.org/freemarket_detail.aspx?control=395 January 3, 2010).

[2] "Causey May Put GAAP On Trial," by Dan Ackman, January 23, 1004, Forbes.com, (Accessed at http://www.forbes.com/2004/01/23/cx_da_0123topnewse.html on January 2, 2010).

[3] "How Enron awards do, or don't, trickle down," By Kris Axtman, Staff writer of The Christian Science Monitor, June 20, 2005, (Accessed at http://www.csmonitor.com/2005/0620/p02s01-usju.html on January 2, 2010).

[4] "Fannie’s Christmas Eve Surprise," by Steven Davidoff, NY Times, January 4, 2010, (Accessed at http://dealbook.blogs.nytimes.com/2010/01/04/fannies-christmas-surprise/ on January 4, 2010).

[5] "What’s a Bailed-Out Banker Really Worth?," By STEVEN BRILL, NY Times, Published: December 29, 2009, (Accessed at http://www.nytimes.com/2010/01/03/magazine/03Compensation-t.html?pagewanted=all on January 4, 2010).

[6] "GOVERNMENT ECONOMIC REPORTS: THINGS YOU’VE SUSPECTED BUT WERE AFRAID TO ASK! Federal Deficit Reality (Part Three in a Series of Five), by Walter J. "John" Williams, September 7th, 2004, (Accessed at http://www.shadowstats.com/article/federal_deficit_reality on January 3, 2010).

[7] "A Citizen's Guide to the 2008 Financial Report of the US Government," (Accessed at http://www.fms.treas.gov/fr/08frusg/08frusg.pdf on January 3, 2010).

Table 1, page 4 of the report compares the budget deficit of $454.8 billion and the net operating cost of $1.009 trillion. "A Snapshot of the Government's Financial Position & Condition" on page 10 shows Social Insurance Liabilities that increased from fiscal year 2007 to 2008 by $4.073 trillion. So a deficit of $454.8 billion is reported, while the national debt increases by $997.7 billion, and total liabilities increase by approximately $5.1 trillion.

According to the annual letter from the commissioner for the US Treasury for the fiscal year ended October 2008 (pdf):

"The financial results for the year include total receipts of $2,523.6 billion, a decrease of $44 billion under 2007 receipts; total outlays of $2,978.4 billion, an increase of $249.2 billion over 2007 outlays; and a $454.8 billion deficit, a decrease of $293.3 billion under the 2007 deficit."

From the letter from the commissioner of the US Treasury for the fiscal year ended October 2009 (pdf):

"The financial results for the year include total receipts of $2,104.6 billion, a decrease of $419 billion from 2008 receipts; total outlays of $3,521.7 billion, an increase of $543.3 billion from 2008 outlays; and a $1,417.1 billion deficit, an increase of $962.3 billion from the 2008 deficit."