Why Aren’t CPA’s Part of the Economic Solution?
By: Rene Velez Feb 10th, 2009
The country is a buzz about the economic downturn of one of the greatest capitalist societies in the world. People’s confidence in the Corporate world is by recent accounts at an all time low. Government credibility and its effectiveness is in doubt. Despite our congress’ ability to bring about a stimulus package to our economic conundrum by pumping money into the system, their efforts are wrought with a vision of waste, lack of knowledge and leadership and of prudent exercise of judgment. We the people have made a direct connection with the influence and power of big business and that of the associated strings attached to our political leadership. The money has gone to the wealthy despite the dire straights of the common citizen. To add insult to injury, reports of corporations conferring dynastic compensation packages to executives, purchasing corporate jets and travel and entertainment junkets to luxury destinations leaves nothing less than a bitter pill in the mouths of Middle American families.
In Iran, fanatical Muslims are chanting death to America, and rejoice on our economic hard times. Shameful, especially in that we have in large part brought this recession upon ourselves through capitalistic greed. Even our allies look to us for a solution and have spoken out against unregulated and egregious capitalism.
Psychological Economics
To a degree any potential solution or combination of solutions must involve a mind altering jolt, to snap us out of the pessimism that prevails in today’s markets. Besides sound economic policy and true leadership nothing, could create the psychological catalyst to stimulate confidence and a renewed economy as the metrics of transparency. This economic situation requires the skillful salesmanship of a change agent that can back his/her rhetoric with proof by the numbers. I dare to say, nothing short of this will bring us out of the economic tailspin we are seeing. In the end the solution to any turnaround requires all involved to buy into the plan and become part of the solution.
To this end the accounting profession should be at the forefront of offering the systems, and metrics to show the American people and the world how well or badly, the government is performing on any taxpayer money it uses to leverage us out of this hole. The country needs to see, how many banks are saved, how many jobs are rescued, how many jobs are brought back in line, who is making money, what industries are being benefited, how much money is being put into service, how is the money being placed and who owns those companies that are getting the money. How much is each state, city and local government getting, what is the amount invested today and how will that help the state, city and the citizens into the future. Can a return on investment be calculated. What thought process and qualifying factors are being used to award government contracts and funds. No profession is better able to analyze, record, interpret and report these findings than the accounting profession. In a congress where some 90% of its members are attorneys, who may be well endowed in the nature of politics and the law, few understand accountability and how to present it in a fair manor. This is, in my opinion a major flaw to the American political system.
The Sidelined Profession of Accounting
I have for many years been very critical of how the accounting profession portrays the value they render to our great nation. We as a profession have failed to educate the average person of what we do and what our responsibility is to the public, even though “public” is the middle name of our designation. We have failed to take on congress and to gain our rightful place as watchdog of government spending. While we clearly perform many services, we do report many abuses, we do know the ins and outs of the inequities of government, we are hog tied and gagged by the power and influence of Corporate America and their partners in waste and deceit, our very own elected officials. We have a Government Accountability Office (GAO) that has a role to supervise, oversee, evaluate, establish rules and systems and to report its findings to all about government activities. Yet it is essentially powerless and toothless in its ability to enforce and enact change on those it reports on. The accounting profession has direct ties to the Securities and Exchange Commission (SEC) and is subject to the promulgated laws and rules when it performs audits of public companies, yet we lack the power and authority to command changes that would safe guard wealth and the economic security of this spectacular of all capitalist nations. Although we do by and large add great value to the capitalist system by fair and standardized reporting of those companies that trade in our capital markets, as well as on government activity, we are leashed to the ministerial tasks of our profession as opposed to establishing the forum for transparency and for internal controls that make for a better capitalistic system and democracy.
The theory of Laissez faire when implemented has created a glass wall to the accounting profession in that no one wants a meddling professional accountant putting obstacles and questioning the free market forces and the flow of capital. Certainly, many know that we are not well liked when we come calling for records and explanations during an audit. But asking the tough questions with a trained mind leaning towards skepticism is in fact, what brings about value to our economy as a whole. Yet, we have a professional obligation to a certain extent be regulators with a commanding authority. By no means should the profession interfere, but we should have, a commanding voice that has the power to compel investigations and analysis of industries and trends. This is part of our implied role as watchdog. We also need to have authority with teeth to bite back when abuses are demonstrated. To bring about legal action or law enforcement when it is demonstrated and reasonably understood that there is public risk in excess of reasonable reward. Essentially this is the “whistle blower” laws on steroids.
Think of what a difference that would of made in the banking industry and in having an opportunity to evaluate removal of the Glass-Steagall Act in light of today’s economic demise of both our banking system and our investment sectors. Think of the role a more authoritative accounting profession could of played in the analysis of overleveraged banks and in evaluating the lending process and the risk shifting of high risk mortgage pools.
The profession is so poorly weighted in its importance to twenty first century economics that we are doing the great capitalist society a great deal of harm. Here too is an example of a profession that has failed to evolve from the concepts of the industrial revolution to the needs our nation faces as a global economic power with long reaching implications for American interest throughout the world. If you don’t think so read the press these days and see how many countries blame the U.S. for shameful capitalist conduct.
By: Rene Velez Feb 10th, 2009
The country is a buzz about the economic downturn of one of the greatest capitalist societies in the world. People’s confidence in the Corporate world is by recent accounts at an all time low. Government credibility and its effectiveness is in doubt. Despite our congress’ ability to bring about a stimulus package to our economic conundrum by pumping money into the system, their efforts are wrought with a vision of waste, lack of knowledge and leadership and of prudent exercise of judgment. We the people have made a direct connection with the influence and power of big business and that of the associated strings attached to our political leadership. The money has gone to the wealthy despite the dire straights of the common citizen. To add insult to injury, reports of corporations conferring dynastic compensation packages to executives, purchasing corporate jets and travel and entertainment junkets to luxury destinations leaves nothing less than a bitter pill in the mouths of Middle American families.
In Iran, fanatical Muslims are chanting death to America, and rejoice on our economic hard times. Shameful, especially in that we have in large part brought this recession upon ourselves through capitalistic greed. Even our allies look to us for a solution and have spoken out against unregulated and egregious capitalism.
Psychological Economics
To a degree any potential solution or combination of solutions must involve a mind altering jolt, to snap us out of the pessimism that prevails in today’s markets. Besides sound economic policy and true leadership nothing, could create the psychological catalyst to stimulate confidence and a renewed economy as the metrics of transparency. This economic situation requires the skillful salesmanship of a change agent that can back his/her rhetoric with proof by the numbers. I dare to say, nothing short of this will bring us out of the economic tailspin we are seeing. In the end the solution to any turnaround requires all involved to buy into the plan and become part of the solution.
To this end the accounting profession should be at the forefront of offering the systems, and metrics to show the American people and the world how well or badly, the government is performing on any taxpayer money it uses to leverage us out of this hole. The country needs to see, how many banks are saved, how many jobs are rescued, how many jobs are brought back in line, who is making money, what industries are being benefited, how much money is being put into service, how is the money being placed and who owns those companies that are getting the money. How much is each state, city and local government getting, what is the amount invested today and how will that help the state, city and the citizens into the future. Can a return on investment be calculated. What thought process and qualifying factors are being used to award government contracts and funds. No profession is better able to analyze, record, interpret and report these findings than the accounting profession. In a congress where some 90% of its members are attorneys, who may be well endowed in the nature of politics and the law, few understand accountability and how to present it in a fair manor. This is, in my opinion a major flaw to the American political system.
The Sidelined Profession of Accounting
I have for many years been very critical of how the accounting profession portrays the value they render to our great nation. We as a profession have failed to educate the average person of what we do and what our responsibility is to the public, even though “public” is the middle name of our designation. We have failed to take on congress and to gain our rightful place as watchdog of government spending. While we clearly perform many services, we do report many abuses, we do know the ins and outs of the inequities of government, we are hog tied and gagged by the power and influence of Corporate America and their partners in waste and deceit, our very own elected officials. We have a Government Accountability Office (GAO) that has a role to supervise, oversee, evaluate, establish rules and systems and to report its findings to all about government activities. Yet it is essentially powerless and toothless in its ability to enforce and enact change on those it reports on. The accounting profession has direct ties to the Securities and Exchange Commission (SEC) and is subject to the promulgated laws and rules when it performs audits of public companies, yet we lack the power and authority to command changes that would safe guard wealth and the economic security of this spectacular of all capitalist nations. Although we do by and large add great value to the capitalist system by fair and standardized reporting of those companies that trade in our capital markets, as well as on government activity, we are leashed to the ministerial tasks of our profession as opposed to establishing the forum for transparency and for internal controls that make for a better capitalistic system and democracy.
The theory of Laissez faire when implemented has created a glass wall to the accounting profession in that no one wants a meddling professional accountant putting obstacles and questioning the free market forces and the flow of capital. Certainly, many know that we are not well liked when we come calling for records and explanations during an audit. But asking the tough questions with a trained mind leaning towards skepticism is in fact, what brings about value to our economy as a whole. Yet, we have a professional obligation to a certain extent be regulators with a commanding authority. By no means should the profession interfere, but we should have, a commanding voice that has the power to compel investigations and analysis of industries and trends. This is part of our implied role as watchdog. We also need to have authority with teeth to bite back when abuses are demonstrated. To bring about legal action or law enforcement when it is demonstrated and reasonably understood that there is public risk in excess of reasonable reward. Essentially this is the “whistle blower” laws on steroids.
Think of what a difference that would of made in the banking industry and in having an opportunity to evaluate removal of the Glass-Steagall Act in light of today’s economic demise of both our banking system and our investment sectors. Think of the role a more authoritative accounting profession could of played in the analysis of overleveraged banks and in evaluating the lending process and the risk shifting of high risk mortgage pools.
The profession is so poorly weighted in its importance to twenty first century economics that we are doing the great capitalist society a great deal of harm. Here too is an example of a profession that has failed to evolve from the concepts of the industrial revolution to the needs our nation faces as a global economic power with long reaching implications for American interest throughout the world. If you don’t think so read the press these days and see how many countries blame the U.S. for shameful capitalist conduct.
The Tools vs. The System
By and large the theory, tools, metrics the required understanding to all those disciplines that make our economy work are there. What is lacking is the independent, funded working system and framework to oversee, analyze and debate and report issues in a master framework that strives to bring about effectiveness and efficiency of our capitalistic society and our global economic influence.
What the United States needs is a United States Economic Development Board of Governors that takes on the role of watchdog, information gathering and analysis of fundamental economic issues and promulgates required legislative initiatives by elected officials. These promulgated initiatives shall have the following requirements:
(1) Promote economic stability.
(2) Make for efficient capital markets.
(3) Provide for efficient and effective banking.
(4) Provide for fair and balanced international trade.
(5) Create systems and controls and reporting for a transparent government.
(6) Create public private partnerships for innovation and the improvement and development of the country’s infrastructure.
(7) Create an effective and efficient government spending system
(8) All promulgated initiatives to legislators should have clear and obtainable times frames for any required laws, bills and other executive orders. It shall also impose strict time frames for completion of the tasks and the spending involved.
(9) Create a system for national healthcare, funded by corporations and government.
(10) Create a system for a national retirement system funded by corporations, individuals and government.
(11) Create a system that allows federal, state and local tax credits for qualified volunteer services rendered by individuals and corporations.
I am sure there are more critical items we could add however, in essence we need to be able to address core issues that further our social and economic interests in order to maintain our economic well being.
The Success of Autocracies in the 21st Century
Two notable authors Fareed Zakkaria and Robert Kagan in their books “The Post American World” and in “The Return of History”, respectively, make brilliant commentaries of the rise of Autocratic governments such as China and Russia. These governments are a far cry from what our government is, what it will ever be, yet they have had great success in developing their economic might with dictatorship style of governess.
Not that I cater to this form of government, yet as of late I see some sense in the current talk of U.S. nationalization of industries. Of course only the current economic situation brings mention of this, worthy of presentation for a great democracy like the U.S. What I do think is the key driver to their economic success is not the form of government at all. It’s that their form of government brings about strict initiatives that are accomplished in record times. That concerted efforts and in effect prime directives initiated at the top, are acted upon and brought to fruition in Stalin type fashion is very admirable and deserves mention. At the most innovative companies this is a key form of governess. Our liberal democracy is expensive, wasteful, time consuming and generally ineffective and adversarial towards addressing social and economic issues in today’s 21st century global climate. To say this in other terms; our government can not and is not built for business. Every time we try we wind up with $10,000 coffee pots and $100,000 toilets. We need to find the way to incorporate the autocratic decision making and initiative based methods to steer social and economic based policy into our democratic way of government. We need to isolate our legislative process to how best to pass the laws required to manage our country and leave the initiatives, measurement and evaluation from concept to implementation to an independent body that injects and mandates the important drivers into our government.
With regards to autocracies, the fact of course that their government will not succeed because they are mistrusted and mal aligned to the interests of other countries is a topic of political struggle not one of economic benefit. I don’t agree with dictatorships yet we do and should find ways to co-exist with all sovereign nations.
Conclusion
For years we have made fancy talk about bringing business based approaches to government. That was great talk then. Today in light of the capitalistic greed and fiasco that surrounds us I am not too sure we want business in our government. But more to the point business ventures in government will never work because the focus and goal of our elected officials is skewed and opposed to the better interest of our nation. An initiative driven government in a democratic structure driven by an independent body as the way to "fast track" critical reforms is something we need to discuss and the accounting profession’s skill set together with an existing value system of honesty and integrity could be a powerful force in moving this country in the right direction. The question is who among us has the fortitude and desire to venture into such waters. Maybe, our new president should consider this structure and be ring master.
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