New era, one way or the other

[Brad De Long]

>Perception is reality. When the numbers don't look so hot, you just
>change them. From today's NYT:
>
>The nation's personal savings rate -- savings as a percentage of
>disposable income -- which had dipped to record lows in negative
>territory was 2.1 percent in the third quarter under the new
>calculations.
>
> Under the new GDP methodology, savings associated with a
>worker's government pension plan will be counted as personal
> savings, rather than government savings. That doesn't affect the
> GDP, but it does boost the nation's personal savings rate.
>
>Hilarious! Take your $2,000 credit card balance to the bank and tell
>them that under the new methodology, they really owe you $3,000.

No. The change does boost estimated personal savings. But it reduces 
the government surplus by the same amount.

Left over from my days working at the Treasury is a U.S. Government 
FERS account for which they send me statements every six months. At 
the moment the contributions paid into and the interest accrued on 
this FERS account are counted as an asset of the Federal 
Government--even though it is *mine*. After the change it will be 
counted as *my* asset.

The question is: when does the government spend the money associated 
with pension contributions it makes? The old view was that the money 
is spent only when the government actually writes a check to the 
beneficiary. The new view will be that the money is spent when the 
pension *vests*--even though it may not be paid out for 50 years.

I think the second is an improvement. But then, I am generally in 
favor of running two sets of government accounts: a cash-flow balance 
for Keynesian stabilization purposes, and a long-term 
intergenerational-type accrual balance for long-term planning 
purposes...

Brad DeLong