"The Class With The Gold Makes The Rules"

How new ‘golden rule’ fleeces workers
By Cheryl LaBash
Published Jan 8, 2011 8:52 AM

Capitalism has a golden rule: The class with the gold makes the rules. When public workers, their unions, pensions and benefits are blamed and pummeled for creating massive budget deficits, this is something to keep in mind.

For example, Detroit’s 2010 overall deficit went up by $692 million — an increase of nearly 80 percent over the 2009 reported shortfall. Why? A new accounting rule has been instituted.

The Government Accounting Standards Board — GASB — is not part of the government. It is “an operating component of the Financial Accounting Foundation,” a private, not-for-profit corporation partially funded by the “municipal bond community.” (See www.gasb.org and www.accountingfoundation.org)

GASB 53 estimates the future cost of speculative financial instruments heavily pushed by banks as a “creative solution to government costs.”

In 2009 two new accounting rules, GASB 45 and 49, caused Detroit to report $157.4 million in additional estimated future costs.

What is the result? Michigan Treasury spokesperson Terry Stanton stated the city would need to craft a new deficit reduction plan or update the current one to continue receiving state revenue sharing. (bondbuyer.com, Dec. 28) Deficit reduction equals cuts of workers and sales or privatization of city infrastructure — what accountants term “assets” — like power generation, water systems or roads.

Detroit is only one city of many where workers and communities are being squeezed with job losses, reduced incomes, foreclosures and evictions. Cities across the U.S. are facing huge budget shortfalls and public workers are under attack.

The officers and board of the GASB have current or former ties to Microsoft; UBS Global Asset Management; Vanguard Group; Fannie Mae; the private bank, Brown Brothers Harriman and Co.; KPMG; LLC auditors; JP Morgan Fleming Management; and more. BBH employed such well-known individuals as former U.S. senator, Prescott S. Bush; former U.S. secretary of commerce and New York governor, W. Averell Harriman; and former U.S. secretary of defense, Robert A. Lovett.

GASB and FAF board members are not elected. There are no workers or labor representatives on the board. There are no representatives that guarantee that the rights of African-American, Latino/a or other oppressed communities are respected.

GASB rules are rarely enforced by any state law or regulation, but rather by auditors. A bad audit lowers bond ratings for municipalities. A bad bond rating makes credit more expensive.

The new accounting rules make the cuts seem reasonable and cast in stone, but they are not. And accounting rules don’t erase the right of every person to a decent and good-paying job or income, health care, education and a home.
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