A radical new approach to government accounting that would require the US administration to account for the cost of future social security payments year by year as people build up entitlements will be proposed on Monday.
The proposal by the federal accounting standards advisory board (FASAB) – which would also require the government to account for benefits accrued under Medicare and other social insurance programmes in the same way – is unprecedented internationally. It would radically change the presentation of US government finances, in effect bringing forward the cost of rapidly increasing social security and Medicare obligations and greatly increasing the reported fiscal deficit.
George W. Bush’s administration is firmly opposed to the proposal, which officials believe wrongly implies that the government is contractually obliged to make future payments based on current benefit rules.
They fear this would make it more difficult to reform the big entitlement programmes and increase pressure on future governments to raise taxes to meet projected funding shortfalls.
The big increase in the reported fiscal deficit under the proposed rule could have an immediate political effect, making it more difficult to press for Bush tax cuts scheduled to expire in 2010 to be made permanent.
This will ripple all over the place, or “trickle down” as it were. FASAB “preliminary views“.