Democratic
Party Deception
DemocraticDeception.com
Letter to
Congresswoman DeGette on Ethics
April 2, 2009
Congresswoman Diana DeGette
600 Grant Street Suite 202
Denver, CO 80203
2335 Rayburn House Office
Building
Washington, D.C. 20515
Congresswoman DeGette:
I am a CPA with auditing
experience spanning 30+ years. The
majority of what I have seen in my career is legitimate attempts by people to
be straightforward. Occasionally I have
observed deceptive activities. Through
it all I have learned the value of reasonable oversight, a point you and I
share. Concerning the need for
reasonable oversight of the House of Representatives, the following letter
leads to two questions for you to answer.
1)
Do you think it is a violation of the Code of
Ethics for Government Service (see Code attached) for anyone in Government
Service to intentionally use a well know tactic of deception with a projection,
a deception tactic understood by the accounting profession and illegal in parts
of the private sector?
2)
On
February 9, 2009 (a) on the floor of the US House of
Representatives, Budget Committee Chairman Spratt made the following statement
with support of a chart: “This is a simple bar graph. It shows that the Bush administration, when
he came to office, had a phenomenal inheritance. A budgeting surplus over the next 10 years by
$5.6 trillion. That was January, 2001.” As
I will explain in this letter, Chairman Spratt’s comments and graph are not
supported by the 2001 CBO budget projection he uses as the basis for the
claim. Furthermore, the use of a
projection for deception is a well understood tactic. Upon completing your analysis of the events
in this letter, please answer this question.
Do you think Chairman Spratt’s February 9, 2009 statement and referenced
chart on the floor of the US House of Representatives is a violation of the
Code of Ethics for Government Service?
Deception with a Projection
For the background on
the tactic of deception with a projection I offer two points.
First, the American
Institute of Certified Public Accountants (AICPA) highlights the potential to
mislead a reader of financial forecasts, also known as projections.
The AICPA Audit and
Accounting Guide (b): Guide
for Prospective Financial Information, copyright, American Institute of
Certified Public Accountants, Inc., Updated as of May 1, 2007
Financial
forecasts should be prepared in good faith.
6.09 The potential to mislead a third-party reader
of financial forecasts is greater than that for historical financial
statements…Good faith also includes exercising care not to mislead a
third-party reader.
Second, prior to the stock
market collapse of 1929 there was a practice of deceiving potential securities
investors through the use of projections.
In fact, the practice was so prevalent the tactic became illegal in the
private sector by passage of The Securities Act of
1933 (c). The penalty for violation
of the Act (Sec. 24) includes prison. To
avoid deception The Securities Act of 1933 (Sec. 27A) requires the use of a
projection to include meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from the projection.
Therefore, when providing projection results to the public the inclusion
of meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from the projection is the
underlining principle necessary to avoid deception, regardless of whether the
projection is prepared internally or externally, publicly or privately, or by a
partisan or non-partisan group.
“Bush Inherited $5.6 Trillion Surplus”
The basis for the budget surplus Chairman Spratt
references on February 9, 2009, occurred on January 31, 2001 when the
Congressional Budget Office (CBO) issued The Budget and Economic Outlook: Fiscal Years 2002-2011 (d). This document begins with the following
statement:
“In
the absence of significant legislative changes and assuming that the economy
follows the path described in this report, the Congressional Budget Office (CBO)
projects that the total surplus will reach $281 billion in 2001. Such surpluses
are projected to rise in the future, approaching $889 billion in 2011 and
accumulating to $5.6 trillion over the 2002-2011 period.”
As pointed out by the CBO, and also in conformity
with the preparation of every projection, the projected surpluses were based on
a series of assumptions. With the CBO
document being available online I will only state, based on my reading, a few
CBO assumptions associated with the surplus budget projection. The assumptions include the continuation of
the Dotcom/Tech Boom, continued reductions in Defense spending and continuation
of the disproportionately higher earnings gains by high income earners. Having said this, there is no need to reference
any specific assumption to prove the existence of deception by Chairman
Spratt. The pertinent issues associated
with the assumptions are that they exist, they are critical in determining the
projected results, they are subject to error, a lay person does not necessarily
understand their importance in the preparation of a projection and their
uncertainty must be disclosed to avoid misleading third-parties.
To minimize the potential for deception with the
2001 surplus budget projection the CBO considered it necessary to include 11
pages of uncertainties associated with the projection. Deception by Chairman Spratt occurs because
he did not reference any uncertainties with his reference to the projected
results.
To highlight the potential to deceive with a
projection, an opportunity seized by Chairman Spratt, and the effort put forth
by the CBO to reduce the potential for deception; I will draw attention to a few CBO
comments included in the 2001 surplus budget projection (e):
“(T)he
U.S. economy and the federal budget are highly complex and are affected by many
economic and technical factors that are difficult to predict. As a result,
actual budgetary outcomes will almost certainly differ from CBO’s ($5.6
Trillion surplus) baseline projections.”
“Moreover,
projections that are quite different from the ($5.6 T) baseline also have a
significant probability of coming to pass.”
“Thus,
the short-term outlook for the economy, and hence for the budget, is
particularly uncertain when the business cycle may be approaching a turning
point.”
“The
longer-term outlook is also unusually hard to discern at present.”
“Figure
5-1 is intentionally somewhat fuzzy because the uncertainties are themselves
estimates.”
“For
example, the figure (5-1) suggests some probability, albeit small, that the
budget might fall into deficit in 2006, even without policy changes.”
“Since
the Deficit Control Act requires CBO to use those inflation factors and to assume
that current policies remain in place, the baseline projection is not a prediction
of future outcomes.” – Emphasis added
From these few sentences the CBO believed the USA
economy was difficult to predict; the final outcome would almost certainly differ
from the $5.6 trillion surplus projection; the short-term outlook for the 2001
economy, and hence the $5.6 trillion surplus projection, was uncertain; the
longer-term economic outlook was hard to discern; the uncertainties associated
with the projection were themselves estimates, the budget might return to
deficits without any policy changes from President Bush and the CBO was not
making a prediction.
The above demonstrates the uncertainty of the budget
projection, but the following is an explicit statement by the CBO about the
future of the USA budget surpluses.
“The primary
negative risk
(f) (to the $5.6 T
surplus budget projection) is that the current (2000) slowdown might turn into
a recession. Although forecasters widely anticipated that economic activity
would slow, the deceleration has been surprisingly rapid. … Although those developments must be watched
carefully, they do not as yet constitute a strong reason to expect a
recession.”
Because the primary negative risk in January 2001 to
the $5.6 trillion projected budget surplus was the economy going into
recession, a risk that became a reality in March 2001, that single primary negative
risk realization eliminated the possibility of the $5.6 trillion surplus budget
projection becoming a reality, based on the assumptions contained in the 2001
CBO report. The CBO as stated above
concluded there was also a possibility the budget would return to deficits
without any policy changes.
A cursory reading of the five page Summary Section
of the 190 page 2001 CBO projection will provide an understanding of the
uncertainty associated with the $5.6 trillion projected surplus without reading
the explicit statement by the CBO in the Outlays Section the baseline ($5.6
trillion surplus) is not a prediction by the CBO of future outcomes.
Based on prior acts, Chairman Spratt’s
comments on February 9, 2009 are an intentional attempt to deceive.
As stated earlier, on February 9, 2009 Chairman
Spratt stated: “This is a simple
bar graph. It
shows that the Bush administration, when he came to office, had a phenomenal
inheritance. A budgeting surplus over
the next 10 years by $5.6 trillion. That was January, 2001” and included his
supporting chart (Chart 1 attached) stating “Bush Inherited $5.6 Trillion
Surplus.”
The above statement by Chairman
Spratt is contradictory to the CBO’s statement the projection was “not a
prediction of future outcomes” and Chairman Spratt did not include any
reference to the fact that the actual results of the CBO 2001 projection could
differ materially from those projected in the forward-looking statement or
projection, as stated by the CBO in the report.
The above statement is not an
innocent oversight because Chairman Spratt’s Committee on the Budget made
essentially the same point on February 4, 2008 and included the same chart
point (see Chart 2.) Here is the
statement:
“In all, the $5.6 trillion
projected ten-year surplus that the Administration inherited when it took
office has been converted, under realistic estimates, into a $3.2 trillion
deficit. This represents a swing of $8.8
trillion in the wrong direction – the largest fiscal deterioration in American
history.” – House Budget Committee, Majority, John Spratt (D-SC) Chairman,
February 4, 2008.
Looking back to a previous
statement by Ranking Member Spratt in 2001 provides the necessary evidence to
conclude the attempt at deception by Chairman Spratt at deception on February
9, 2009 was intentional.
The following is a
January 31, 2001 statement by Ranking Member Spratt’s committee.
“Finally, these
projections are highly uncertain—particularly for the years farthest in the
future. We have been lucky in recent years to see budget estimates unexpectedly
turn in our favor. They could just as easily turn against us.” – Ranking Member
Spratt (D-SC), January 31, 2001, House Budget Committee, Democratic Caucus (g)
An additional 2001 statement from
Ranking Member Spratt.
“First of all, these surpluses
are projections, and we shouldn’t be swept away by them. Seventy-two percent of
the on-budget surplus that is projected for the next 10 years occurs in the second
5 years of that 10-year period. They may or may not pan out. Let us hope they
do.” – Ranking Member Spratt (D-SC), March 1, 2001, House Budget Committee
Meeting (h)
As opposed to
Chairman Spratt’s February 9, 2009 statement where he states with the aid of a
chart the Bush administration inherited $5.6 trillion surplus, in 2001 Ranking
Member Spratt included the necessary cautionary statements about a
projection. As previously stated,
cautionary statements about projected results are required to provide an
understanding that
the actual results of the CBO projection could differ materially from those
projected in the forward-looking statement.
The statements by Ranking Member Spratt in 2001 are straightforward and
did not include any element of deception with a projection.
Based on my experience in the
area of financial deception, in light of Chairman Spratt’s position of
leadership and knowledge on the USA budget and CBO projections, I believe the
above is sufficient to prove on February 9, 2009 Chairman Spratt intended to
deceive Americans with a tactic of deception.
A tactic of deception well understood in the accounting profession and a
tactic illegal in some areas of the private sector with possible punishment for
offenders in the private sector to include prison. Chairman Spratt is not in the private sector.
Congresswoman
DeGette’s use of the same tactic of deception.
On June 22, 2006, you,
Congresswoman DeGette, used the same tactic of deception in your press release
when you stated:
“Instead
of wasting time trying to give away more Congressional power to Karl Rove and
the White House, we should enforce the “Pay-As-You-Go” rules. These rules force
spending increases and tax cuts to be paid for before they are enacted and
enabled Congress and President Clinton to turn a $290 billion deficit into a $5.6 trillion surplus in
just 6 years. Sadly it took President Bush and his Republican Congress
just five years to turn that surplus into a $3.2 trillion deficit.” – Emphasis
added (see Attachment)
Your
press release did not even include a reference it was a projected $5.6 trillion
surplus but implied there was actually a $5.6 trillion surplus.
Congresswoman
DeGette, based on your participation in the above described deception
technique, I am dubious of the value of your opinion; however, I will state my
two questions again.
1)
Do
you think it is a violation of the Code of Ethics for Government Service (see
Code attached) for anyone in Government Service to intentionally use a well
know tactic of deception with a projection, a tactic understood by the
accounting profession and illegal in parts of the private sector?
2)
On
February 9, 2009 (a) on the floor
of the US House of Representatives, Budget Committee Chairman Spratt made the
following statement with support of a chart: “This is a simple bar graph. It shows that
the Bush administration, when he came to office, had a phenomenal
inheritance. A budgeting surplus over
the next 10 years by $5.6 trillion. That was January, 2001.” Do you think Chairman Spratt’s
February 9, 2009 statement and referenced chart on the floor of the US House of
Representatives is a violation of the Code of Ethics for Government
Service?
Please be aware it is my
assertion the following Representatives have also used the tactic of deception
described above on at least one occasion:
Speaker Pelosi on September 29, 2008; Majority Leader Hoyer on February
9, 2009; Rep. Scott (D-VA) on March 25, 2009; Rep. Waxman on May 17, 2006; Rep.
Perlmutter (D-CO) on March 21, 2007 and Rep. J. Salazar (D-CO) on January 5,
2007. Links to the above can be found
at: (i). The above
list is not considered exhaustive by me.
I have additional details on my
non-commercial website (j) explaining the tactic of deception with a
projection.
I look forward to your timely
response.
Regards,
Original signed and delivered to Rep. DeGette on April 2,
2009
Gregory R. Brice, CPA
Denver, CO 80210
References
a) http://www.democraticdeception.com/dems-02-09-2009-deceive.htm
b) http://www.reportcard2000.com/aaf-cover-and-mislead.pdf
c) http://www.sec.gov/about/laws/sa33.pdf (not included on original letter)
d) http://www.cbo.gov/ftpdocs/27xx/doc2727/entire-report.pdf
e) http://www.reportcard2000.com/MajorPoints2001.htm
f) http://www.reportcard2000.com/Economic_outlook2001.htm#primaryneg
g)
http://www.reportcard2000.com/spratt_2001.pdf
h)
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=107_house_hearings&docid=f:70617.pdf page 10
i)
http://www.reportcard2000.com/deception-log.htm
j) http://democraticdeception.com
Attachments
CODE OF ETHICS FOR
GOVERNMENT SERVICE
Any
person in Government service should:
1. Put loyalty to the
highest moral principals (sic) and to country above loyalty to Government
persons, party, or department.
2. Uphold the
Constitution, laws, and legal regulations of the United States and of all
governments therein and never be a party to their evasion.
3. Give a full day's
labor for a full day's pay; giving to the performance of his duties his earnest
effort and best thought.
4. Seek to find and
employ more efficient and economical ways of getting tasks accomplished.
5. Never discriminate
unfairly by the dispensing of special favors or privileges to anyone, whether
for remuneration or not; and never accept for himself or his family, favors or
benefits under circumstances which might be construed by reasonable persons as
influencing the performance of his governmental duties.
6. Make no private
promises of any kind binding upon the duties of office, since a Government
employee has no private word which can be binding on public duty.
7. Engage in no
business with the Government, either directly or indirectly which is
inconsistent with the conscientious performance of his governmental duties.
8. Never use any
information coming to him confidentially in the performance of governmental
duties as a means for making private profit.
9. Expose corruption
wherever discovered.
10. Uphold these
principles, ever conscious that public office is a public trust.
[Source: U.S.
House of Representatives Ethics Committee]
Referenced Chart by Chairman
Spratt – February 9, 2009
Chart 1
Obtained from Budget Committee Member
Rep. Bobby Scott (D-VA) – website. Chart
also used by Rep. Scott (D-VA) on March 25, 2009 http://www.bobbyscott.house.gov/index.php?option=com_content&view=article&id=294&Itemid=96
Chart 2
Committee on the Budget, John Spratt, Chairman,
February 4, 2008
Excerpt
SEC. 27A. [77z–2] APPLICATION
OF SAFE HARBOR FOR FORWARDLOOKING
STATEMENTS.
(C) Safe Harbor - (2) ORAL FORWARD-LOOKING
STATEMENTS.—In
the case of an oral forward-looking statement made by an issuer that is subject
to the reporting requirements of section 13(a) or section 15(d) of the
Securities Exchange Act of 1934, or by a person acting on behalf of such
issuer, the requirement set forth in paragraph (1)(A) shall be deemed to be
satisfied—
(A) if the oral
forward-looking statement is accompanied by a cautionary statement—
(i) that the particular oral statement
is a forward-looking statement; and
(ii)
that the actual results could differ materially from those projected in the
forward-looking statement;
and
(B) if—
(i)
the oral forward-looking statement is accompanied by an oral statement that
additional information concerning factors that could cause actual results to
differ materially from those in the forward-looking statement is contained in a
readily available written document, or portion thereof;
(ii)
the accompanying oral statement referred to in clause (i) identifies the document,
or portion thereof, that contains the
additional information about those factors relating to the forward-looking
statement; and
(iii)
the information contained in that written document is a cautionary statement
that satisfies the standard established in paragraph (1)(A).
SEC. 24. [77x] Any person who
willfully violates any of the provisions of this title, or the rules and
regulations promulgated by the Commission under authority thereof, or any person
who willfully, in a registration statement filed under this title, makes any
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, shall upon conviction be fined not more than $10,000 or imprisoned
not more than five years, or both. 2
Office
of Congresswoman Diana DeGette
600 Grant St., Suite 202 , Denver,
Colorado 80203
1527 Longworth House Office Building, Washington, D.C. 20515-0601
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FOR IMMEDIATE RELEASE |
Contact:
In DC - Brandon MacGillis (202) 225-4431 |
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Statement
by U.S. Representative Diana DeGette on Voting Against the Line Item Veto |
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WASHINGTON DC – Today U.S.
Representative Diana DeGette (D-CO) joined a majority of her Democratic colleagues
in voting against the Legislative Line Item Veto Act of 2006, H.R. 4890. “Clearly, Republicans can’t
control their own spending so they’re asking President Bush to control it for
them. That’s makes about as much sense
as giving a toddler a big bag of Skittles and expecting him not to eat them
all. “Instead of wasting time trying to
give away more Congressional power to Karl Rove and the White House, we
should enforce the “Pay-As-You-Go” rules. These rules force spending
increases and tax cuts to be paid for before they are enacted and enabled
Congress and President Clinton to turn a $290 billion deficit into a $5.6
trillion surplus in just 6 years. Sadly it took President Bush and his
Republican Congress just five years to turn that surplus into a $3.2 trillion
deficit. “Republicans must learn fiscal
discipline.” #
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