Measuring the True Cost of Government Bailout

Government intervention to assist individual businesses and industries during the 2008–2009 economic crisis was extraordinary in variety and scope. Despite official protestations of no more bailout‖ in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, future government interventions are inevitable, should economic circumstances become sufficiently dire. Moreover, even if Congress eliminates overt bailout-type interventions, indirect forms of public bailout are likely to continue. Understandably, taxpayers have been concerned about the cost. A simple tally of dollars authorized or disbursed is wholly inadequate to accurately assess the costs of various interventions. This Article addresses the challenges of providing reasonable budgetary information with respect to different types of bailout expenditures. In addition to looking at costs for the more obvious bailout programs, the analysis explores the special cost estimation challenges for other more covert actions, such as special tax breaks or relief from burdensome regulation, that serve a bailout function. The Article also takes issue with the fragmentation of intervention efforts among different on-budget and “off-budget” entities and with some of the methodologies used by the government to value assets obtained in its bailout efforts, arguing that decision making about the appropriate allocation of aggregate resources is hampered when some expenditures are “off-budget” altogether and when even “on-budget” agencies use different accounting methods. Finally, the Article calls for transparency and budget accounting for public bailouts accomplished more indirectly through the tax system and other regulatory regimes. Adequate and transparent budget accounting for bailout costs requires greater consistency in valuation and accounting methods, and a more unified presentation of aggregate information in the budget with respect to all government bailout-type activities

Federal Policy for Financially-Distressed Subnational Governments: The U.S. States and Puerto Rico

This Article addresses the aftermath of the Great Recession specifically focusing on its effects at the local and statewide levels. Block uses the financial situation in Puerto Rico to detail the common presumption against the use of federal government assistance to financially-distressed subnational governments. Block then analyzes rebuttal arguments that the states and Puerto Rico might use to overcome the initial presumption against federal assistance and gives suggestions to facilitate the structuring of relief efforts in the rare circumstances when federal intervention is warranted

Congress and Accounting Scandals: Is the Pot Calling the Kettle Black?

Scandalous fraud and improper accounting practices in the private sector forced the collapse of several major corporations, including WorldCom, Enron, and Enron’s accountant, Arthur Andersen. Prosecutors have charged firms, as well as individual officers and executives, with criminal fraud, money laundering, conspiracy, and obstruction of justice in connection with the accounting scandals. Congress responded by adopting the Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002, or the Sarbanes-Oxley Act, which created an independent board to oversee the accounting industry, amended securities laws to require greater corporate responsibility, enhanced corporate financial disclosure requirements, and increased penalties for accounting fraud. Yet Congress itself has been guilty of using accounting devices remarkably similar to those used by the corporations to “cook the books” and mislead the public with regard to government finances. Part II of this article explores the extent to which Congress might legitimately apply a double standard, using different accounting rules for itself in connection with the federal budget than those applicable to the private sector in connection with financial accounting. Part III considers differences between financial and budget accounting and provides analysis and comparison of accounting standards applicable to the private sector, government agencies, and to Congress itself. Part IV compares several major congressional accounting gimmicks with those used in private-sector accounting. In addition, it considers congressional accounting gimmicks unavailable to the private sector

Truth and Probability—Ironies in the Evolution of Social Choice Theory

Social choice theory explores the ways in which individual preferences or choices translate into group choices. One of the most devastating discoveries of social choice theory is sometimes known as the voting paradox, brought back to modem consciousness by economist, Kenneth Arrow, in his famous work entitled Social Choice and Individual Values. Roughly stated, the paradox is that voting in situations involving more than a simple, binary choice will not always reveal the true decision of a decision-making body. The motivation for this Article is to understand how and why, having discovered the voting paradox in 1785, Condorcet actually became a more ardent believer in democratic decision making in later writings until his unfortunate death in 1794. More importantly, this Article examines Condorcet\u27s discovery of the voting paradox in the larger context of his life\u27s work to determine what solutions to the paradox he might have seen that modem social choice theorists and the legal literature have not fully explored. Part II of this Article briefly describes the history and implications of social choice theory and the famous voting paradox. Part III first offers a general picture of Condorcet\u27s life and work. It then explores the connections between the philosophies of Condorcet, Rousseau and the more modem civic republican traditions. Part IV takes a closer look at Condorcet\u27s original decision-making theory. Part V uncovers many civic republican themes within the context of the larger body of Condorcet\u27s work and uses these themes to explore what his work might contribute to the modem discourse