The FASAB has asked
that the United States government start including future Medicare and
Social Security liabilities in current budget deficit figures:
the Federal Accounting Standards Advisory Board released a proposal in
which the government would have to account for the cost of future
Social Security payments year by year as people build up entitlements.
Seen in advance of its release by the Financial Times, the switch in
accounting practices would be an international accounting anomaly, as
most other governments treat social insurance as a political commitment
to pay future benefits rather than a financial liability, the newspaper
The FASAB is made up of six independent members who support the
proposal and three opposing members from the U.S. Treasury, the White
House Office of Management and Budget and the Government Accountability
I support this change despite the fact it may result in what I consider bad outcomes (e.g. big tax increases) as the magnitude of future liabilities become clear. Tyler Cowen also argues it may make these programs harder to scale back, since it shifts the future payments from a political promise to a financial commitment. But just like free speech, one has to be consistent in one's support for transparency.
If this all seems arcane to you, let me give you some perspective. Today, Jeff Skilling was given over 30 years in jail for various accounting-related frauds, supposedly hiding losses and liabilities from shareholders's view. But what Skilling was convicted of doing were minor, subtle accounting tricks involving penny-ante sums of money compared to the egregious games Congress plays with accounting for the federal government's future liabilities. Skilling was accused, for example, of booking future liabilities in certain joint ventures where they were hard to find; the feds, in contrast, do not book future liabilities at all.