Debt Does Not Equal Revenue Except in California

Striking quote on inability to understand that debt != revenue:

California is also confused about the meaning of the term “revenues”. Asked at a 2008 budget conference whether Schwarzenegger would consider raising revenues to balance the budget, Thomas Sheehy, deputy director of the Department of Finance, replied that the governor’s budget, in fact, already included new revenues: $3.3 billion from the sale of deficit bonds! A corporate executive who reports borrowed dollars as sales is angling for for a bunk in federal prison. It doesn’t take much financial sophistication to understand that a cash advance on your credit card isn’t revenue. It is debt.

California Crack-up, p.95

The authors follow this with this comment which I think is of striking relevance to Open Spending:

The first, crucial step towards responsible and democratic budgeting is to present the state’s fiscal information to Californians honestly and clearly.

It also reminds me of Niall Ferguson’s statement quoted in a previous post:

The present system is, to put it bluntly, fraudulent. There are no regularly published and accurate official balance sheets. Huge liabilities are simply hidden from view.

Not even the current income and expenditure statements can be relied upon in some countries. No legitimate business could possible carry on in this fashion.

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One Comment

  1. Posted August 12, 2012 at 6:48 pm | Permalink

    While of course the core point here is correct (that the US have a debt problem, both in government and in private households), I would be careful about turning this into a language issue. The fact that its suicidal to use the term “taxes” in US public debates is part of the problem, and making it more acceptable by saying that it’s really “true revenue” is just avoiding that issue.

    Futzing with the language is creating more smoke (how do you describe the sum of all money raised by government?) and it works both ways. A nice example here are EU member states, I think: Germany has federal expenditures of ~320bn but raised ~360bn in 2012. The difference is money for state governments and the EU’s “own resources” (US liberals, listen up: this is how Eurocrats avoid the evil word), which is labeled as negative revenue.

    The rationale here seems to be that since the money was never really intended for the federal government we don’t need to count it as expenditure. But once you have this concept, it’s a slippery slope: why not make the same argument for pension or medical funds? Bam, we’ve turned budget consolidation into an accounting problem…

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