Our Financial Situation is Dire: Do Not Invert Right and Wrong

Our Financial Situation is Dire: Do Not Invert Right and Wrong
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
April 12, 2010

The Republic of China's finances are not good. But domestic and foreign financial experts agree that while our financial situation may be far from ideal, it is not yet terminal. As long as the authorities understand the situation. As long as people with clear heads are in charge, we have a chance to turn the situation around. But if those in authority are confused, if they defy the basics of economics and finance, and engage in willful sophistry, then our situation cannot be turned around, and we cannot expect the situation to improve. Last week Treasury Chief Huang Ting-fang made a number of remarks reflecting the erroneous views held by the Ministry of Finance.

Over the past several months, whenever international credit rating agencies and domestic experts criticized our government's finances, Ministry of Finance officials would respond with two forms of sophistry. First, they would conflate "deficit" with "debt balance." Secondly, they would use "current account surplus" as a smoke screen for "overall deficit." Both are violations of the elementary rules of accounting and finance. And yet Ministry of Finance officials from the top down have engaged in such deceptions. But the more they dissemble, the sooner the truth will come out. They cannot deceive international credit rating agencies.

Let us clarify the meaning of debt balance. This is a basic term in accounting. A deficit means the government's annual revenue falls short of its expenditures. It is akin to corporate profit and loss. It represents annual "flow" figures. Flow figures alone cannot accurately reflect a nation's finances. Suppose a nation's total debt is high. Even if its annual income exceeds its expenditures, it may spend most of its annual revenue paying off the interest on old debts. Even if such a government shows a surplus for the year, it may not be able to make its payments.

For this reason, financial experts the world over propose using the debt balance as a replacement for the fiscal deficit when evaluating a government's financial situation. The so-called debt balance refers to a government's total outstanding debt. It is akin to the the "liabilities" on a corporate balance sheet. It refers to the amount of savings. It accurately reflects a government's total liabilities. All of the world's finance textbooks use debt balance to measure a government's finances. Credit rating agencies the world over do too. That financial authorities on Taiwan would seek to escape responsibility and cover up their dereliction of duty is not surprising. But to violate global accounting practices and engage in financial chicanery is intolerable.

Secondly, we would like to point out how the Ministry of Finance habitually uses the "current account surplus" to cover up its overall deficit. The Treasury Chief and the Minister of Finance have repeatedly told reporters Taiwan's "current account" has a surplus. They have said that its "capital accounts" are government investments that will provide future income, therefore the deficit is not that serious. But this is sophistry concealing a dangerous mistake.

Last year's financial tsunami left a number of well-known domestic flat panel manufacturers in financial straits, forcing them to accede to takeovers. The vast majority of these companies' expenses were used on depreciating their machinery. They were all "capital account" deficits. Yet the companies went under nevertheless. Consider Korea in 1997, when it received a knockout punch during the Asian financial crisis, primarily because investment was too fast and the debt ratio was too high. Korea spent most of its money on capital outlays. But its main problem was financial flow. If it could turn this around, it would succeed. It it couldn't, it would endure a painful death. The results would be the same whether it was due to current expenditures or capital expenditures. Examples of this abound. Yet the Treasury Chief and Treasury Minister offered the press so much sophistry.

Treasury officials twisted the truth each time our international credit ratings hit new lows. Their willful sophistry cannot of course fool professionals. Its only purpose is to mislead the president and the premier, who are not financial experts. If they are successful, they will have protected their rice bowls. Protecting the nation is not their concern.

We would like to remind Ma, Wu and other high officials that if they allow themselves to be duped about the basics of finance, and ignore the views of experts at home and abroad, it will reflect badly on them. Experts have invoked Tang Poet Li Bai's phrase, "Floating clouds constantly obscure the sun, I cannot no longer see the capitol and that is my sorrow." Let us hope this does not become the collective concern of Republic of China taxpayers.

財政問題嚴重 不容顛倒黑白
【聯合報╱社論】
2010.04.12 03:51 am

台灣的財政狀況不佳，幾乎是國內外財政專家的共識。這樣的財政結構儘管不理想，卻也還不至於病入膏肓；只要當局有危機意識，以理念清楚的人掌管其事，情況還是有轉圜的餘地。但是，如果主政者觀念混淆，還要以違反財政學ＡＢＣ的謬論肆意強辯，那不僅於事無補，也預告了未來情況難以改善。上周國庫署署長黃定方的一番言論，著實反映了財政部的錯謬見解，就格外值得批評。

在過去幾個月中，每當國際信評機構或國內專家學者對台灣財政有所批評，財政部高官就會抬出兩套歪理來予以抗辯，其一是以「財政赤字」混淆「負債餘額」，其二是以「經常帳剩餘」粉飾「整體赤字」。這兩種扭曲皆違反了會計學與財政學的ＡＢＣ，而財政部自部長以下的高官動輒作此等誤導，愈描愈黑，瞞不過國際信評專家。

讓我們弄清負債餘額的觀念。用最基本的會計語言來說，財政赤字是政府每年收入不及支出的數額，像是一般公司損益表上盈餘或赤字的觀念，是每年呈現的「流量」數字。只要舉個例子，就了解這流量數字不能正確反映國家的財政狀況。如果一個國家負債總量極高，即使這個國家每年收入大於支出，則每年支出的絕大多數金額都要用來支付舊債本息。因此，就算該國有年度盈餘，其財政也已經無法因應具有建設意義的支出。

正因如此，全世界財政學者才會主張以負債餘額取代財政赤字，來觀察一國的財務情況。所謂負債餘額，是指一國某一時點在外流通債務的總數，像是一般公司資產負債表中的「負債」總額，它是一個「存量」的觀念，正確刻劃出政府的總負債。全世界所有國家的財政學教科書，都是以負債餘額衡量政府財政狀況，而全世界所有信評機構也皆採用相同的指標。台灣的財政當局想要逃遁或掩飾失職的責任，外界可以理解；但要以扭曲全球共通會計原理的方式強辯，我們就萬難接受了。

其次，我們也要指出財政部喜用「經常帳剩餘」掩飾整體赤字錯誤之不當。國庫署長與財政部長多次向記者指陳，台灣的「經常帳」是有剩餘的，而「資本帳」是政府投資，將來有報酬，所以那裡產生的赤字不嚴重。但這樣的觀念又是一種狡辯式的扭曲，背後所隱藏的錯誤觀念其實非常危險。

如所周知，國內最近有知名面板公司在去年金融海嘯期間，因財務調度出問題而不得不被併購。這些公司的支出絕大多數是機器投資的折舊，都是「資本帳」的赤字，但是公司說倒就倒。再看一九九七年的韓國：當時該國受亞洲金融風暴襲擊而應聲倒地，主要也是因為該國投資太速、負債比率過高。韓國當年絕大多數的政府支出都是用在資本門，但財務問題主要就是個周轉問題，轉得過來就成功、周轉不過就死狀甚慘，不論是經常門或資本門，其後果都是一樣。外在事例不勝枚舉，而國庫署長與財政部長卻對記者講這麼多歪理，殊不足取。

財政部官員在多次國際信評墊底的情況下一再扭曲事實、強自辯解，當然不可能唬弄得了專業人士的判斷；其唯一的目的，應當就是要誤導不具財經專家訓練的總統與閣揆。一旦誤導成功，當然是保住了官位；至於是否繼續傷害台灣，那就不在他們的思慮之中了。

我們要提醒馬吳等府院高層：如果連這基本的財政學ＡＢＣ都能誤信一面之辭，完全不理會海內外所有的專家意見，其所宣示的意義是非常負面的。有學者在文章中點出「總為浮雲能蔽日、長安不見使人愁」的語句；但願這樣的憂慮，不要逐漸成為台灣人民的集體憂慮。