Accrual vs. Cash Accounting in Federal Spending Discourse

In listening to the debates recently regarding both the historical tax cut of the Trump administration against the various SARS-COVID relief acts and a potential infrastructure bill, I noticed that we conflate the argument by not distinguishing between two fundamentally different ways of looking at money flows.

While not usually used on behalf of government spending, distinguishing between the potential intent or obligation to spend money in future vs. the actual flow of cash on behalf of that spending is illustrative. Specifically, in the context of government spending:

Accrual accounting recognises either the intent or permission of the administrative branch of the US government to spend money on a planned basis.
Cash accounting tracks actual cash movements.

From this, we can distinguish several salient points:

Legislative Spending is an Accrual Basis Concept

Legislation that stipulates government spending should be thought of on an accrual basis, i.e. while the intent of the legislative branch may be to spend funds for a specific program, there are several issues that may keep that spending from actually occurring from the executive branch. For example, programs may not ramp up as rapidly as planned, future legislation might pull the spending back, delays in program implementation etc.

For example, as of this moment 2020 Relief Act stipulated the availability of $2.08 trillion through a combination of direct payments, delayed or wholly deferred taxes and agency spending. However, even by October 2020, a significant portion of these funds had not been spent. ¹

Just because a spending bill is passed doesn't imply that the cash necessary for it will actually be "spent". In some ways, legislative spending is like an option, providing the administrative branch an intent and right or permission to spend but is not able to explicitly force it to do so.

Treasury Operations are a Cash Basis Concept

When we speak of deficit spending, we mean that the cash required for government spending is more than that available from tax receipts or existing cash reserves. Thus, the Treasury must borrow money from the private sector by selling US Government debt obligations (bills, notes and bonds) to raise the requisite cash.

This is almost tautologically a cash accounting concept. While the Federal Reserve can (to some degree), "manufacture" new money, the Treasury is only able to provide cash to agencies through tax receipts and borrowing if necessary.

What Happens When We Mix the Two Concepts?

When the Republican Party criticized the $1.9 trillion 2021 American Rescue Plan ² by decrying the impact on the Federal deficit, it's being disingenuous at best. As described above, assuming that "proposed" spending (on an accrual basis and that may not actually occur) will imply the need to raise more cash (on an cash basis) is clearly not true.

In fact, the Trump administration treasury left the Biden administration a massive pile of cash ($1 trillion³) that significantly reduced the need for the Treasury to add more to the deficit on behalf of actual spending associated with the American Rescue Plan!

TL;DR;

Don't imply that incremental government spending will impact the US deficit as you're conflating accrual versus cash accounting concepts.