Measuring the Government Sector of the U.S. Economic Accounts (1998) / Chapter Skim
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The System of National Accounts
The System of National Accounts
Pages 1-9
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Understanding the economic impact of government actions and formulating effective government policies require reliable quantitative information about government taxing, spending, and borrowing. The accounting categories used to tabulate and present this information influence understanding of the size and structure of the government sector.
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Finally, governments have become vital participants in financial markets, not only as direct borrowers but also as lenders, guarantors of private loans, and purchasers and consolidators of private loans. The NIPAs and the financial accounts prepared by the Federal Reserve provide a wealth of information about the diverse economic roles of governments.
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NIPA treatment include a distinction between spending for current consumption and for fixed capital formation; a more inclusive definition of "government enterprises" and an accounting treatment that emphasizes their business nature by placing them entirely in the private sector; and classification of government pension plans as owned by households rather than by governments. The SNA also differs from current U.S.
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(Twenty billion of consumption of fixed capital by government enterprises does not show up in final output.) This change in accounting concepts thus would have the effect, in this particular example, of raising GDP by $91 billion, or almost 2 percent; gross domestic fixed capital formation would be increased by about 21 percent; and final consumption by government reduced by about 8 percent; see Table 2.
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While many difficult issues of definition and valuation will remain, the development of a government investment account as part of the 1996 NIPA revisions provides the essential building block that will allow further work on an integrated set of accounts for the government sector. Government Enterprises Government enterprises are government-owned entities that produce goods and services for sale to the public; that are organized and operated separately from the owning government; and that keep separate financial records.
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Government Employee Pension Plans In both the NIPAs and the SNA, funded private pension plans are treated as financial institutions that sell financial services to households.4 Employees covered by the plans are considered to own financial assets equal to the net equity of the funds. Personal income includes the pension plan contributions of employers and the property income (mainly dividends, interest, and rental income)
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Adoption of the SNA treatment for state and local government pension plans would reduce government saving and increase household saving by $54 billion; extension of the SNA treatment to the federal government would increase the impact by another $36 billion. RECOMMENDATION This section has described four important benefits of adoption of the SNA for the government sector: identification of government investment in plant and equipment; development of government sector balance sheets; use of an accounting treatment for government enterprises that parallels that for private corporations; and recognition of the household saving invested in government pension plans.
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From page 9... ...
income and product accounts. The Federal Reserve, working closely with BEA, should develop and regularly publish balance sheets for the government sector.
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