Fiscal Transparency in the U.S. and Abroad
Yesterday in a blog post, IMF's Fiscal Affairs Director Carlo Cottarelli stressed the need for fiscal transparency on the part of governments around the world in attaining a comprehensive debt-deal. By fiscal transparency, Cottarelli means the necessity for governments to make fiscal information accurate and readily available. By doing this, governments are able to set reasonable parameters for making "good budget decisions," while at the same time, citizens become well-informed and are able to hold their governments liable for those decisions. Cottarelli writes:
Without good fiscal information, governments can’t understand the fiscal risks they face or make good budget decisions. And unless that information is made public, citizens and their legislatures can’t hold governments accountable for those decisions.
Fiscal transparency—the public availability of timely, reliable, and relevant data on the past, present, and future state of the public finances—is thus to the foundation of effective fiscal management.
But how fiscally transparent have governments been? Citing a paper from the IMF, Cottarelli attempts to assess the gains governments have made, noting that there have been some improvements. In the same vein, he sets out ground rules governments must adhere to. Over the past few years, standards for reporting fiscal data have been enhanced significantly with the number of countries able to report data rising by over 50%. Many have also improved the timeliness of their reporting.
Of course, in the U.S., we have a wealth of budget information compiled by the CBO, OMB, Treasury Department, and the Social Security and Medicare Trustees, among other sources. They show not only historical data, but budget forecasts as far out as 75 years into the future. Information is readily available, and the sources that provide it are trusted to produce non-biased results. In terms of fiscal transparency, we're doing well compared to other countries. Still, Cottarelli has some advice that we could use with regards to our budget process:
Finally, the fiscal adjustment process requires, in many cases, governments to set ambitious targets for reducing deficits and debt. We know from experience that governments in these circumstances are often tempted to resort to creative accounting as a way of avoiding, albeit temporarily, the tough fiscal choices implied by those targets.
It is important that we have a blueprint for where our budget should go, and we should make sure that our accounting standards are up to the task.