Tuesday, February 08, 2005

The brave new world of "transition financing"

Yesterday's New York Times had an article about the President's new magic show (i.e. proposed 2006 federal budget). The article presents a number of very large costs the President has omitted from his budget which, if included, would make it impossible for him to keep his promise of halving the federal defecit by the end of this term. The best quote of the entire article comes at the very end in reference to the $775 billion the government will have to borrow to "transition" Social Security into a privatized system. According to Josh Bolten, the head of OMB, the new SS borrowing is not included because,
"Transition financing does not represent new debt."
Why is that? Well, according to Mr. Bolten, as long as projected future sources of revenue that will be used to pay back the money borrowed exceed the amount owed, then there is no debt.

This, fair readers, is an amazing opportunity waiting to be seized! The old, outdated norms of personal financial accounting should be renounced, and the new methods of Bush Accounting adopted! This is a revolution waiting to happen, and one that will benefit nearly all of us. Consider the following chart showing my personal net worth under the old methods:

Old Accounting Method
Debts Assets Net Worth
$109,300 $16,700 -$92,600

What a buzzkill. Under the old methods, I was just another 30-something with a negative networth Sure, most of that was due to law school loans, but try telling that to finance companies when you're trying to get home financing, a car loan, or even a new credit card. Under the new, easy accounting methods of the Bush Administration, behold the miraculous transformation:

Bush Accounting Method
Transition Financing Debt Assets Net Worth
$107,000 $2,300 $16,700 $14,400

Thanks to President Bush, I'm no longer burdened with troublesome school debt. Instead, what I used to call "school debt" is now merely "transition financing" enabling me to move from a low-paid non-profit management job into a medium-paid public interest law job. As a result of incurring this "transition financing", my future earning increases and voile, my current net worth is suddenly positive. Sure, all you freedom hating demonrats will point out that I still "owe" $107,000 to my school loan providers, but who cares? I've got good evidence to suggest that my income will exceed my "debt level" at some point in the future. Consider the following comparison of my projected annual income (i.e. revenue) as a government attorney against my transition financing plan (i.e. payoff schedule of consolidated school loans at 4.25%):

Income/Debt Comparison
YearTransition FinancingProjected Income

This chart clearly shows that by no later than 2010, my annual income will exceed my transition financing levels and my adoption of the Bush Accounting will be justified. I highly recommend that each and everyone of you jump on this bandwagon and account yourself into immediate financial viability!