By J. Edward Ketz, associate professor of accounting at Penn State's Smeal College of Business.

To stimulate the economy, one needs to stimulate the accounting. Bankers have often broadcast this mantra in an effort to end fair-value accounting, but these bankers are thinking too small. Let's really stimulate the economy by really stimulating the accounting. And it won't cost taxpayers one cent!

My proposal is very simple. As the economy lists in its doldrums, why not goose the accounting reports and get investors buying stocks again? Once stock prices rise gloriously and the Dow again sees 10,000, the economy will be fixed.

We can achieve this felicitous state by granting each company in the United States the ability to inject $5 billion into its own earnings. As the banks (e.g., Citigroup ( C), Wells Fargo ( WFC), and U.S. Bancorp ( USB)) and auto manufacturers (e.g., General Motors ( GM)and Ford ( F)) remain in serious trouble, we can empower them to add $50 billion into their earnings statements.

We shall extend business enterprises the freedom to boost income in whatever quarters they wish over, say, the next five years. That would allow corporate executives much needed flexibility to manage their earnings. And we don't have to worry about transparency because Americans only want its promise, not its fulfillment.

Congress should permit these companies the freedom to show this infusion of earnings wherever they wish. After all, in a capitalistic society as ours, managers are the ones who best know how to massage the income statements for maximal benefit. Besides, the geography of the financial statements is unimportant to investors and creditors.

So, if a firm wishes to increase its revenues by $5 billion, that would be fine. But, if a firm would rather decrease the cost of goods sold or its wages expense or even its income tax expense, that would be permissible under this bill.

Firms like General Electric ( GE) might want to acquire another entity and use its earnings surplus. GE might even argue that it is entitled to $15 billion -- $5 billion for itself, $5 billion for the acquired company, and $5 billion because of the new combined enterprise. We should let them do this since earnings are easy to produce, cost us nothing, and will prove so advantageous to the economy. Besides, nobody can understand their financial reports.

This suggestion also should include an early adoption of international accounting standards. As the international accounting rules let business entities implement virtually any revenue recognition method they wish, then U.S. firms would automatically comply with these standards.

Of course, double-entry bookkeeping insists that the balance sheet balance. With the recognition of these new-found revenues or reductions of expenses, the retained earnings account increases. What do we amend to ensure that assets still equal liabilities plus stockholders' equity? Easy: Congress should allow CEOs and their minions the privilege of either increasing assets by the same amount or reducing liabilities by the same amount. Firms can choose which assets to increase or which debts to decrease.

I would suggest corporations reduce liabilities because that would reduce financial leverage from the dangerously high levels of today to something tolerable or even respectable. Of course, creditors would want their money so the debts aren't really discharged. Corporations just won't show the liabilities--quite similar to how the FASB and the SEC permit banks and others not to disclose their hundreds of billions of dollars of debts in special purpose entities and other off-balance-sheet vehicles (e.g., Lehman Brothers).

This stimulus bill won't touch the cash flow statement. This won't be an impediment because investors and creditors fixate on earnings. If investors can ignore Enron's free cash flows of negative $4.5 billion in 1998 and 1999, cash flow must be unimportant.

Auditors shouldn't mind this suggestion. As they gave us no early warning signals about the subprime mess, we won't make them evaluate these stimulus earnings numbers. Everybody will be happier with unqualified audit opinions.

And the cost of this program is zero. That's right, not one penny will be spent on this project because what we are doing is merely increasing corporate earnings.

The benefits of this bill are obvious. We goose accounting earnings, investors and creditors go wild. They buy stocks and bonds and everybody's retirement statements appear rosy. Optimism abounds everywhere. Stimulate the accounting, stimulate the economy.

J. Edward Ketz is associate professor of accounting at Penn State's Smeal College of Business.

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