It All Comes Down To Accounting

Authored by Jeffrey Tucker via The Epoch Times,

There are two portals of money in every institution: money coming in and money going out. Keeping track of that in both directions is the key to operations. The final number can reveal profits or losses, surpluses or deficits. Regardless, the accounting books are the beating heart of every institution.

Accounting means accountability, holding people to account for their work.

This is why the Department of Government Efficiency (DOGE), formed by Elon Musk with a business-based mindset, sets its sights on two primary institutions in the federal government: the U.S. Treasury payment systems and the revenue agency. That is where the money goes out and where the money comes in.

Tying these together and tracing the funds with normal accounting standards is the key to eliminating waste, fraud, and abuse. This is all about verifying what is true. It’s not enough just to look at printouts of Congressional budgets or long spreadsheets published by some other agency. The only way to discern what is absolutely true is to go to the source.

The penetration of both ends of this have generated astonishing results, among which that many millions of Social Security recipients are apparently not alive. Or maybe they are and this is just a recordkeeping error. They are going to find out one way or another.

The most shocking revelation from the very limited look at the U.S. Treasury books that judges have permitted DOGE concerns proper tagging of expenditures. They have documented that $4.7 trillion in government spending is not tagged with what’s called a Treasury Access Symbol (TAS) that ties the spending to a Congressional authorization.

Those are huge numbers. Maybe all these expenditures are legitimate and authorized. Or maybe not. Without the TAS tag, there is no way to know. That change in the books has now been made mandatory so that at least we have the beginnings of a valid and verifiable system of accounting in government.

One does wonder. Every year, Congress debates the budget and there is horse trading all around with every politician fighting for a share of the loot. They estimate revenues. They forecast deficits and debts. After a version is produced that includes both the House and Senate, the final result is sent to the President for a signature.

From there, we’ve always just assumed that the deeper machinery of the bureaucracy takes it from there. But what if there is no real and necessary relationship between what Congress authorizes and what the President approves and what actually happens on the expenditure and revenue side? This seems to be the situation.

How long has this gone on? Five former Secretaries of the Treasury have said that it has been almost 80 years since elected officials and their appointees have had access to the payment systems. They have been controlled for all living memory by a small group of civil servants who have long walled themselves off from the electorate. This is a stunning realization, one of many that has been unearthed by the forensics being undertaken by DOGE. It remains entirely possible that once this group of appointed outsiders have completed their work, which is in two years, the budget will be balanced even with lower taxes.

That might sound crazy but it is entirely possible.

To be sure, many administrations have come and gone that swore to get to the bottom of the budget problem, to eliminate waste and fraud and make sure that the government is a better steward of public resources. But think about it. If they never really had certifiable access to the real-time sources of collecting and spending, what good could they actually do? This time does seem to be different.

It fascinates me that the real battles of our time really do come down to something as granular and seemingly mundane as accounting. One hundred years ago, a big debate broke out within economics and political science over accounting and its role. This debate spoke directly to the issue of economic systems and which would be best for society.

The socialists in those days said that they would implement their vision with collective ownership of the means of production and the assignment of experts at the top to direct the use of resources. Economist Ludwig von Mises in 1920 made the salient point. He said that with collective ownership, there would be no operational markets for capital goods and thus no market prices for them.

Market prices are essential for calculating profit and loss through means of double-entry bookkeeping. Without that, even the smartest central planning would lack access to data concerning the wisest use of scarce resources. They would have no idea what consumers valued relative to other options and no idea what kinds of materials were available to meet those needs.

For this reason, Mises said, socialism would institutionalize economic irrationality. Creating an actual economy—meaning an environment in which resources were deployed to their most socially optimal ends—would be impossible. The unfolding of events in Russia proved his point. The experience of socialism in every country would always end up the same: despots at the top squandering resources until the whole society sank into desperate poverty.

Mises concluded from his deductions that the only real system that allows for rational economizing is the market economy with private property in the capital-good sectors. His argument was shocking, and debated for 20 years following, simply because he was bringing cold hard truths to a subject that had been dominated for far too long by airy philosophy that had nothing to do with the realities of the material world.

Similarly, government has always had an accounting problem. It does not know what to charge for goods and services and its decisions about revenue were ultimately arbitrary. The larger the government budget, the more irrationality itself is baked into economic structures. That is a given.

That said, there at least should be some attempt to keep track by creating a web of relationships between what is approved, where the money comes from, and how it is used. This is just normal bookkeeping, without which fraudsters and corruption run rampant.

It truly boggles the mind that fully $4.7 trillion in federal expenditures have routinely taken place without any real obligation to attach that spending to an authorized source. It makes one wonder if all the debates about the budget and all the voting and signing ceremonies have been nothing but theater for generations.

What also intrigues me about this line of thinking and work is how, in the end, this is not really about big ideological and philosophical debates about the purposes and scope of government. This is really about something very simple: how the nation goes about balancing its checkbook. Until we get that part right, all the rest of the debates are so much hot air.

No matter your political outlook, you should be grateful that DOGE seems finally to be setting things right in the operations of government. There absolutely must be a standard of compliance with accounting practices that every single business, nonprofit, or household has to use in order to maintain economic viability. After DOGE does its work, government should continue to practice the precedent established in these days, weeks, and months.

The whole reason for accounting and careful audits is to verify what is true and thus enhance public trust in their own government. Again, we can argue all day about what the government should and should not do, but until we know for certain what is actually going on, such debates mean nothing.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.