Why Governments Appear Solvent Despite Massive Hidden Liabilities, According to Elisha Adeboye
EDITOR'S NOTE: Public finances often project an image of order. Budgets are passed, deficits debated, and fiscal discipline is commonplace in political speeches. Yet beneath this appearance of control, governments bear an enormous long-term burden that is largely absent from headline fiscal discussions. These include future Social Security and Medicare benefits, federal employee and veteran pensions and debt commitments to public debt that go decades in the future, writes Elisha Adeboye, a public finance and accounting specialist.
Source: UGC
Research done in September 2020 by Adeboye, whose work studies the effects of reporting frameworks on fiscal decision-making, argues that this disconnect is not accidental. Adeboye explores how, as a researcher and professional, accounting design frequently determines which obligations dominate political debate and which remain obscure.
How does cash-based budgeting impact long-term obligations?
The main issue is the federal government‘s reliance on cash-based budgeting. While cash accounting is helpful in tracking annual inflows and outflows, it is poor at tracking obligations over decades. Governments can thus appear financially stable in the short term while accruing debt that will greatly constrain future budgets. When these obligations are excluded from headline figures, political debate narrows, and the urgency of structural reform diminishes.
Adeboye notes that long-term liability estimates are not entirely absent from public reporting. Supplemental disclosures, including the U.S. Treasury’s Financial Report of the United States Government, contain detailed projections of accrued and unfunded obligations.
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However, these documents are separate from the core budget process. If long-term commitments are made without reference to annual fiscal decisions, the policy debates will more likely be focused on the short-term trade-offs at the expense of long-term sustainability.
Such repercussions go beyond the level of technical reporting. On the one hand, policymakers get more freedom to postpone making hard choices, while on the other hand, future taxpayers get to inherit the costs coming from decisions they did not really have any say in. The build-up of fiscal pressure takes place silently, and only when the options are very limited does it become visible.
Can transparency in reporting reduce fiscal risks?
Adeboye characterises this situation as a problem of governance rather than an oversight in accounting, pointing out that the distribution of the burden across generations depends on which aspects of the government's activities they decide to measure and discuss.
Evidence from accrual accounting deepens the reasoning. Most public sector organisations, as well as many state and local governments account for liabilities when they are incurred rather than at the time of cash payment. While accrual accounting does not eliminate fiscal risk, Adeboye argues that it forces the prompt recognition of long-term costs. In addition, it makes the connection between current policies and future consequences clearer. The increased clarity, he believes, may lead to a change in the behavior of institutions, and even those that have complex bureaucracies.
Institutions like the Congressional Budget Office are highlighting some serious issues we need to face. Shifts in demographics, rising healthcare costs, and an aging population, all create a significant gap between future spending obligations and expected revenue. When budget discussions overlook these long-term projections, governments often find themselves treating the symptoms of financial problems instead of addressing their root causes.
Elisha Adeboye also points out lessons from state and local governments. Many of these entities have to report on unfunded pension liabilities, thanks to existing accounting rules. While simply revealing these figures hasn’t solved funding issues, it has changed how the public views the situation and makes it harder to ignore these growing obligations. He argues that while transparency does not guarantee consensus, it does make it tougher to deny the realities.
Adeboye's work shows that financial reports are more than just neutral records. When budgets prioritize quick fixes instead of thinking long-term, we risk overlooking serious future risks. Ultimately, this raises a vital point: even when things look financially stable today, deep vulnerabilities might be lurking beneath the surface, especially if the focus is only on the short term.
Expert bio: Elisha Adeboye is a distinguished accountant and researcher whose work sits at the intersection of financial integrity. He holds a Bachelor of Science in Accounting from Bowen University, a foundation that has shaped his analytical approach to financial practice and emerging challenges in the field. He has equally distinguished himself as an impactful researcher, with scholarly work spanning fraud prevention in small businesses, auditing reform, and the role of government grants in startup growth.
Disclaimer: The views and opinions expressed in this article are solely those of the expert. These views and opinions do not necessarily represent those of briefly.co.za, its editors or other contributors.
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