Paul B. Kazarian Presentation Slides

Paul B.
Kazarian Presentation Slides

A Leading Through Crisis Web Program with:
Jared Bernstein, former VP Joe Biden Chief Economist
&
Paul B. Kazarian '81, CEO of Japonica Partners and KCPFM
Moderated by Shivaram Rajgopal, Columbia Business School
Tuesday, 14 July 2020, 12:30 p.m.
Columbia University
Draft 14.07.2020.1240LIS
Five Misconceptions That Are Perpetuating
the Broken Debt & Deficit Model
1. Total government balance sheets do not exist.

2. Debt and deficit are the most meaningful
financial indicators.
3. There are no metrics more insightful than debt
and deficit as a percentage of GDP.
4. A better government performance model does
not exist.
5. US government is a global benchmark in
financial performance.
2
Total Government Balance Sheets
Do Exist and Debt is Only One Part
Example: UK 2018
(Pages 96-97)
Financial Assets 8%
Non-Financial Assets 23%
Total Government Assets 31%
Financial Debts 20%

Non-Financial Debts 49%
Total Government Debts 69%
Total Government Balance Sheet 100%

3
Total Government Balance Sheets are Very
Large and Rapidly Expanding
The UK Whole of Government balance sheet provides insights
into its relative size and rapid increases. The UK WGA balance
sheet is 314% of GDP and from 2010 to 2018 increased at 4.6x
the growth of UK GDP.
2010 2018 2010-2018
Total Government Balance Sheet
£69,726 £99,961 £30,235
Per Person (WGA)
GDP Per Person £25,287 £31,880 £6,593
TGBS Per Person /

276% 314% 4.6x
GDP Per Person
Notes: TGBS from UK WGA; 2010 adjusted for subsequent restatements. GDP from IMF Oct 2019 WEO database. 4
The Japan Government’s Debt Burden is a
Small Fraction of that Reported
- Working Draft -
% of GDP
Gross Debt as Reported by IMF and EC 237%
Peer Comparable Gross Debt Reporting 102%
Peer Comparable Net Debt Reporting TBD
Adjusted Japan Government Debt (Credit Perspective) TBD
Sources: IMF, EC, and Japan government data. 5

Budget Deficits Consistently Understate Annual
Negative Fiscal Balances
Over the past 20 years, the US budget deficit was only 66% of, or $6 trillion below, the negative annual
performance reported on the Federal government’s financial statements.
Budget Surplus
Budget (Deficit)/
Fiscal Balance Surplus (Deficit) Difference Fiscal Balance
(billions) (billions) (billions)
2000 to 2020 9M -$21,558 -$14,227 -$6,020 66%
2020 9 Months -$4,056 -$2,744 -$1,312 68%
2019 -$1,445 -$984 -$461 68%
2018 -$1,159 -$779 -$380 67%
2017 -$1,154 -$666 -$488 58%
2016 -$1,052 -$587 -$465 56%
2015 -$514 -$439 -$75 85%
2014 -$791 -$483 -$308 61%
2013 -$805 -$680 -$125 84%
2012 -$1,316 -$1,089 -$227 83%
2011 -$1,313 -$1,299 -$14 99%
2010 -$2,080 -$1,294 -$786 62%
2009 -$1,254 -$1,417 $163 113%
2008 -$1,009 -$455 -$554 45%
2007 -$276 -$163 -$113 59%
2006 -$450 -$248 -$202 55%
2005 -$760 -$319 -$441 42%
2004 -$616 -$412 -$204 67%
2003 -$668 -$375 -$293 56%
2002 -$365 -$158 -$207 43%
2001 -$515 $127 -$642 -25%
2000 $40 $237 -$197 598%
Notes: Data from annual financial reports except 2020 9 Months based on CBO 9 month data annualized using prior two year
average. Fiscal Balance is also known as Net Operating Costs or Total Net Cost. 6
There are Three More Insightful Indicators of
Financial Performance than Debt & Deficit
#1 Indicator: Citizens’ Wealth 1 (CW1)
# 2 Indicator: Total Government Net Worth
# 3 Indicator: Total Government Net Worth as % of GDP
7
The “New Zealand Model”
of Public Financial Management is Vastly
Superior to the Debt & Deficit Model
1. The "New Zealand Model" of Public Financial Management (PFM) is a full system of seven
components to improve government performance and position and not only an accounting project.
2. PFM refers to a full system of laws, rules, and processes used to mobilise revenue, allocate public
funds, manage outcomes and outputs, and audit results.
3. New Zealand reports and projects monthly and annually government net worth.
Executive
Decision-
Making
Fiscal
External Audit
Objectives
The “New Zealand Model”

of Public Financial
Financial Management Budgetary
Reporting Process
Outcomes,
Outputs, and Appropriations
Efficiencies
8
New Zealand PFM Model Provides Significantly More
Powerful BENEFITS than the Debt & Deficit Model
In addition to increases in Citizen’s Wealth and Total Government Net Worth
1. Better information improves 1. Financing competitiveness

decision-making. decreases borrowing costs.
2. Better information increases 2. Financing competitiveness
transparency. increases global access.
1. Economic efficiencies through 1. Investor confidence through
better balance sheet management. comparable financial statements.
2. Economic efficiencies through 2. Investor confidence through
better cost management. credible financial management.
1. Net debt reduction is the top 1. Tax relief through better financial
priority financial metric. management.
2. Net debt reduction summarizes 2. Tax relief through economic
financial performance. prosperity.
1. Education strengthens 1. Sustainable growth through sound
accountability. financial management.
2. Education minimizes expectation 2. Sustainable growth through
gaps. minimizing risk.
9
What New Zealand’s Extraordinary Financial Track
Record Can Teach the World: 6 Numbers to Know
Change from 2011 to 2019 (Rounded):
#1. NZ Citizens’ Wealth 1 (CW1) increased $8,000 versus AAA composite declined $8,000.
#2. NZ Total Government Net Worth increased $5,000 versus AAA composite declined $4,000.
#3. NZ Total Government Net Worth as % of GDP increased 10 points versus AAA composite declined 5 points.
3 of the Most Important Government Financial Performance Indicators - Per Person

(US Dollars)
# 3 Indicator:
# 1 Indicator: # 2 Indicator: Total Government Net Worth
Citizens’ Wealth 1 (CW1) Total Government Net Worth as % of GDP
AAA-Rated AAA-Rated AAA-Rated

New Zealand Composite New Zealand Composite New Zealand Composite
2011 to 2019 +7,945 -$8,024 +$5,300 -$4,382 +10pp -5pp
2019 $60,210 $42,774 $19,576 -$17,311 48% -31%
2011 $52,265 $50,798 $14,276 -$12,929 38% -26%
KAZARIAN CENTER FOR PUBLIC FINANCIAL MANAGEMENT

A philanthropic affiliate of Japonica Partners
Press Release
FAQ
Definitions:. Citizens' Wealth 1 (CW1) is total economy GDP less Total Government Net Worth. Total Government Net Worth is Total Government Assets less Total
Government Debts. AAA-Rated Composite is average of Australia, Canada, Sweden, Switzerland, and United States of America governments. Sources: Sovereign
government audited annual financial statements based on international public sector accounting standards from fiscal year 2011 to 2019 or 2018 (as available) adjusted for
restatements and comparability by KCPFM. GDP and population data from IMF October 2019 WEO database. USD converted using Bloomberg historical year end rates.
Disclosures: KCPFM received an independent verification letter on the 18 metrics in this Public Education Campaign matrix. KCPFM has no economic interest in New
Zealand government securities. 10
The United States Government Financial
Performance is Vastly Inferior to New Zealand
3 Numbers: 2000-2019 Change
(USD Change Per Person)
2000-2019 Change Per Person
United New
States Zealand
Citizens' Wealth (CW1) -$25,203 +$44,791
Total Government Net Worth -$53,991 +$18,034
TGNW/GDP Percentage -53 pp +37 pp
Notes: TGNW data from annual government financial reports. GDP and population data from IMF Oct 2019 WEO database.
TGNW adjusted for Federal Debt held by Social Security to reflect true and fair accounting. 11
KCPFM Helpful Links
• Government Debt and Deficit: Myth or Reality? The Great Debate Paul B.
Kazarian Slide Presentation: kazarianfoundation.org/deficitdebate1/slides
• What New Zealand’s Extraordinary Financial Track Record Can Teach the
World: 6 Numbers to Know Matrix: kazarianfoundation.org/nzpfm/matrix/
• Citizens’ Wealth Glossary: kazarianfoundation.org/citizens-wealth-glossary/
• NZ PFM FAQ: kazarianfoundation.org/NZPFM/FAQ/
• NZ Government Financial Statements: treasury.govt.nz/publications/financial-
statements-government/year-end-financial-statements
• UK Government Financial Statements:
www.gov.uk/government/collections/whole-of-government-accounts
• US Government Financial Statements: fiscal.treasury.gov/reports-
statements/financial-report/
12

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Paul B.

Kazarian Presentation Slides

1. Total government balance sheets do not exist.

Financial Debts 20%

Total Government Balance Sheet 100%

GDP Per Person £25,287 £31,880 £6,593

TGBS Per Person /

Sources: IMF, EC, and Japan government data. 5

#1 Indicator: Citizens’ Wealth 1 (CW1)

# 2 Indicator: Total Government Net Worth

# 3 Indicator: Total Government Net Worth as % of GDP

The “New Zealand Model”

1. Better information improves 1. Financing competitiveness

3 of the Most Important Government Financial Performance Indicators - Per Person

AAA-Rated AAA-Rated AAA-Rated

2019 $60,210 $42,774 $19,576 -$17,311 48% -31%

2011 $52,265 $50,798 $14,276 -$12,929 38% -26%

KAZARIAN CENTER FOR PUBLIC FINANCIAL MANAGEMENT

Citizens' Wealth (CW1) -$25,203 +$44,791

Total Government Net Worth -$53,991 +$18,034

TGNW/GDP Percentage -53 pp +37 pp

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