You're Paying For That How?? : Planet Money Kestenbaum reports from a Treasury briefing.
NPR logo You're Paying For That How??

You're Paying For That How??

I've studied quantum mechanics. I'm fine with subatomic particles being in multiple places at once. The warping of space-time? Extra dimensions? I'm cool with all that.

But financial accounting? Boy, some strange stuff in there, as I was reminded of yesterday.

I was at the Treasury Department for a briefing about the upcoming G20 meeting, where the U.S. will try to get nations to pledge a huge amount of money to an emergency fund at the International Monetary Fund, in case the IMF needs it to loan to faltering nations.

The proposed increase is $500 billion. And the U.S. would be kicking in some large chunk.

The tricky accounting part is that although Congress has to approve our contribution. The money would NOT appear anywhere on the budget.

This caused quite a kerfuffle. The reporters buzzed around afterward, asking, "How was this possible?"

A Treasury official explained that this is standard accounting for other dealings with the IMF. It's seen as an "exchange of assets" -- the U.S. promises the money, and gets a "claim" on the fund.

The idea is there is no way the IMF will go bankrupt. So we don't have to include money we kick in on our budget. It's essentially off the books.

So why not pledge a trillion dollars to the fund? I asked. No good answer.

I think it must be that at some point people would lose faith in the financial soundness of the U.S. government.