Tuesday, February 08, 2005

Hitting the Numbers

A couple of the day's headlines struck me as an ironic juxtaposition. In a New York courtroom, we have Worldcom former CFO Scott Sullivan testifying against his old boss CEO Bernard Ebbers. It seems that Ebbers refused to let facts get in the way of "making the numbers" for Wall Street. Receivables that you know will be defaulted? Add them in. Higher-than-expected expenses? Bury them in reserves accounting. Meanwhile, down in Washington, President Bush presents a budget which "shows we're on track to cutting the deficit in half by 2009." Apparently the President, like the erstwhile CEO, has numbers that he's so desperate to hit that no accounting trick is beneath question. $80B per year for the war magically just doesn't count (sort of like those "excluded one-time charges" that show up on financial statements year after year). Effect of proposed tax cuts? Not factored in. The huge cost of proposals to reform Social Security? That doesn't count either, although the current Social Security trust fund surpluses do get counted in, even as they're being replaced with farcical IOUs. And a bunch of program cuts are counted, even though nobody seriously expects all those cuts to pass in Congress (sort of like revenue you know you won't get, but one can always hope). (Business Week and Downtown Lad have the goods on the budget.) I leave it as an exercise to the reader to compare and contrast these two stories.

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