Ridiculous, huh? Government bookkeeping is just as convoluted and that is the point I have been trying to make. They would spend the $5k and claim a surplus plus a paid-down debt while total debt goes up, all at once. You and I do our books just as you described, but government doesn't follow the normal rules. You can borrow and increase your liabilities only up to a certain point. Eventually, you will reach a point where the risk is such that obtaining more loans will be increasingly expensive or impossible. Your only recourse is to pay down your debt or be static.
You asked how to valuate government assets? Good question. Our government has never had its consolidated financial statements audited. We have no way of knowing if the financial statements of the government conform with the same generally accepted accounting principles that they require of business. Look at Enron. It had no cash flow and leveraged itself into insolvency. Government doesn't have that problem because it can be financed on the backs of millions of people. It's also exempt from many laws that are required of others, so they have no fear of consequences.
From a 2005 GAO report:
"As in the seven previous fiscal years, certain material weaknesses in internal control and in selected accounting and financial reporting practices resulted in conditions that continued to prevent us from being able to provide the Congress and American citizens an opinion as to whether the consolidated financial statements of the U.S. government are fairly stated in conformity with U.S. generally accepted accounting principles."
The same report also said that "material weaknesses, fundamental record-keeping and financial reporting, and incomplete documentation had hampered the government's ability to report on assets, liabilities and costs, to measure the cost of financial and non-financial performance, to safeguard assets and record transactions, and to operate in an economical, efficient and effective manner".
Government borrows and spends, the debt goes up every year, unfunded liabilities take the debt to unimagined levels that, without major change, we will never be able to grow our way out of. Then they turn around and have the audacity to claim that for a few years there was a surplus? Even if it were true, it would mean they took more of our money than was required to pay the bills, and they would just spent that, too. The surplus existed on paper, paper with very questionable integrity. The reality is that I can't prove absolutely that there was not a surplus, but the opposite also can't be definitively proven. We just don't know, and that's the real problem.
I still say the surplus is a lie, though. :lol:
