ISBN 0-89523-521-4

Originally published
by Regnery Gateway, 1992
Reprinted and distributed in August 2002
by: Truth In Government
P.O. Box 70 Ossining, New York 10562

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“Joe DioGuardi is one of the real heroes in the War on Waste. In this book Joe reads the riot act over how our lawyer-filled Congress mismanages your money and “cooks” our national books, using numbers like a drunk uses a lamp post - for support rather than illumination.”
– J. Peter Grace, Chairman, Citizens Against Public Waste

“Joe DioGuardi has written a courageous and practical book about the phony budgeting process Congress uses to sustain its financial profligacy. He has both a keen understanding of its accounting gimmickry and some excellent suggestions about how to straighten out our budgetary tangle.”
– William E. Simon, Former Secretary of the Treasury

“DioGuardi has the experience and know-how to expose dishonesty and gimmickry in the federal budget. In this concise, easy-to-read volume, he cuts through the budgetary jargon and offers common sense recommendations to capture a budget that’s out of control.”
– James C. Miller III, Chairman, Citizens for a Sound Economy

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What I found out, in a nutshell, is this: Congress deceives “we the people”. … What I mean is that, as a collective body, Congress continually, systematically and shamelessly deceives the American people by failing to disclose the true cost and financial condition of our federal government. Many members who can still tell falsehood from truth condone all this as a normal, if somewhat regrettable, practice. This book is about that practice and its implications for our democracy and the future of America itself.      

DioGuardi, a member of Congress from 1985-88, is the only Certified Public Accountant ever elected to Congress. This gives him an acute sense of the chicanery engaged in by Congressmen, which in any other organization would land the members in a penitentiary. He opens with an explanation of the federal budget process. It is, unfortunately far too complicated to report here.
DioGuardi’s goal, however, is to give as simple and clear an explanation as possible of the tricks and evasions to which lawmakers resort to dodge fiscal restraints. He summarizes them as the “dirty dozen”, with illustrative anecdotes.

• Fudging the economic numbers. Budget projections take into account automatic increases due to inflation and the impact on revenues of economic fluctuations. Use phony economic estimates to cut projected deficits.
• Off budget spending. For example, the Resolution Trust Corporation used for the S & L bailout, borrows outside the budget figures but pays the FSLIC on budget.
• The Current Services Budget. “The 1974 Budget Act requires the president to submit a ‘current services’ budget showing what it would cost to keep the government running another year if there were no changes in policy. Congress’ trick is to make a change in policy to restrain spending, then brag about a cut, when in fact the only cut is the projected level of spending under existing policy.”
• The magic asterisk. Add: *’Future savings to be identified’ to list.
• The fraud, waste and abuse excuse. Denounce “fraud, waste and abuse”. No one will hold it against you, you sound serious, and you don’t have to act against fraud, waste and abuse.
• Trust fund deficit masking. Set up a trust fund, e.g. Social Security, then spend all the money in it.
• The give-and-take. The 1972 debt limit increase bill imposed a limit which expired the day after it went into effect.
• Phony liability valuations. Count loans to deadbeats as real assets.
• Front-loading. Get revenues early in a program while postponing expenditures - a temporary gain.
• Reconciliation savings. House committees must state how they will meet budget guidelines. One way is to assume fantastic scenarios which would, if true, save money.
• Shifting spending to another year. Change the date of an expenditure to fall outside current year, preferably in last year’s already busted budget.
• The monster bill. “The 1989 reconciliation bill occupied 1,878 pages”, thus Congress only got a single take it or leave it vote.

DioGuardi devotes a chapter to the explanation of accounting principles, and how proper accounting would “bring sanity to the system”. For example, he favors accrual accounting over the cash system, as this would do away with numerous congressional tricks. He points out, however, that officially the federal government went to accrual accounting in 1950, but has always refused to implement the law.

My old accounting firm, Arthur Andersen & Co., has been a pioneer in promoting adoption of accrual accounting by Washington. Back in 1975… Andersen prepared a prototype consolidated financial statements for the federal government using, as closely as they could, GAAP. At that time the Treasury stated that our national debt was $344 billion…. In fact, Andersen found, the national debt was at lest $814 billion.

When Andersen did the books on a gaap basis again, for 1984, the “official” national debt had mushroomed to $1.3 trillion, and the true GAAP debt to an astounding $3.8 trillion…. As Andersen observes, a full accounting of future liabilities for Social Security benefits would expand the GAAP debt to $6.1 trillion (pp. 33-34)

DioGuardi has further chapters on the bailout scandals and congressional self-exemption from legal standards and accountability. He concludes with a program for reform and citizen action.
The book is clear, readable and to the point. It is an excellent book to read, pass along to friends and business associates, or make available in libraries. Homeschoolers could use it for high-school level civics or economics unit.