Those who view Enron’s bookkeeping as convoluted should consider the federal budget, where $4 trillion has just disappeared down an accounting rabbit hole. Talk about fuzzy math.

“There’s some weird economics going on in Washington,” President Bush said on a recent trip to promote his domestic proposals. He was criticising Democratic assaults on his tax cut, but the same indictment has been levelled at federal bookkeeping in general.

On Monday, Bush sent Congress a $2.1 trillion budget, beginning the annual give-and-take that will lead to the financing of the government for another year.

The president’s plan for the budget year that begins October 1 will recommend large increases in spending for defence and homeland security and a renewed drive to revive the economy. It will offer little money for other new initiatives.

Gone is the $5 trillion, ten-year surplus the White House projected just a year ago, reduced to $1 trillion through the period. In fact, for the next few years, the government will run a deficit.

What happened?

“This is a lot like Enron,” suggested Democratic Sen. Deborah Ann Stabenow, likening the vanished $4 trillion to the millions that employees and investors lost when the Texas energy company collapsed.

While the overall comparison may be a stretch, there are some striking similarities in accounting practices:

[bul] Both the government and Enron relied on overly rosy projections, ones that could not stand up to unforeseen developments and an economic downturn.

Enron officials pumped the company’s prospects, helping drive its stock price to $90 a share and then encouraging employees to buy more. Government officials assured Americans the budget surpluses were so large that there was room for a big tax cut, an expensive prescription-drug programme for the elderly, and enough left to help pay down the national debt.

[bul] Both spurned generally accepted accounting principles. Enron set up dozens of mysterious partnerships and accounts that enabled it to cloak debt. The federal government keeps “on budget” and “off budget” accounts, uses temporary surpluses from Social Security to cushion its overall balance sheet. Uncle Sam also borrows money from the US Treasury against expected future revenues.

Enron and the federal government “have many of the same problems,” said former Rep. Bill Frenzel, who was the senior Republican on the House Budget Committee and now is a scholar at the Brookings Institution. Accounting practices in both instances, he said, “are terribly complicated.”

“All kind of liberties are taken,” Frenzel said. He cited a US budget example: listing certain revenue-producing programmes as “negative outlays” instead of as taxes. It started in the Reagan years with Medicare premiums and has since been extended to other programmes.

“It’s a way to make it look like you’re not raising taxes, and keeping expenditures lower,” Frenzel said. “It’s goofy.” He thinks a commission should be set up to propose federal accounting reforms.

If the federal budget process is complicated, the reason $4 trillion of the surplus disappeared is not.

The surplus — which existed mostly on paper anyway — dissolved because the recession lowered tax revenues and led to increased social services spending; the war on terrorism added billions of dollars to the military and homeland security budgets; and the large Bush tax cut further sliced projected revenues.

“The sin we’ve committed is relying too heavily on optimistic projections of the future and enacting legislation that depends on them,” said Robert Reischauer, former director of the Congressional Budget Office and now head of the Urban Institute.

“We shouldn’t be committing resources five, seven and 10 years from now when we don’t know if we will have those resources,” he said. -- AP