Why Government Budgets Use Accrual Accounting

Episode 17 of The Fiscal Policy Podcast dives into a wonky but crucial question: why do most governments still budget on a cash basis when every private company uses accrual accounting? Lucas and Luna walk through a concrete example—a $500 million bridge project that looks cheap in year one but carries $2 billion in future maintenance liabilities that never appear on the government's books. They explore how New Zealand became the first country to adopt full accrual budgeting in the 1990s, and how the U.S. federal government's own financial statements—prepared under accrual rules—show a very different picture from the official budget. The episode also touches on the political incentives that keep cash-based budgeting in place, and why voters rarely see the long-term costs of today's spending decisions. If you've ever wondered why politicians can promise a 'fully funded' program that still blows a hole in future budgets, this episode explains the accounting trick that makes it possible. #AccrualAccounting #CashBasis #GovernmentBudgeting #NewZealand #FiscalAccounting #PublicFinance #InfrastructureSpending #FutureLiabilities #BudgetTransparency #CongressionalBudget #FederalFinancialStatements #GAAP #PoliticalIncentives #LongTermCosts #Economics #FiscalPolicy #FexingoBusiness #BusinessPodcast Keep every episode free: buymeacoffee.com/fexingo