Thomas Sowell

IF even half the things that Enron is charged with are true, then some of the company's top brass should get a few decades behind bars to think over what a dirty thing they have done to so many other people, who trusted them and depended on them. But that is something for courts of law to sort out.

In the meantime, the sight of politicians posturing and demagoguing at televised Congressional hearings cheapens our government, without doing anything to get at the facts or to prevent things like this from happening again. Worse yet, many of these same politicians have for years been doing what Enron is accused of doing -- hiding debts off the books with accounting tricks.

Social Security is a classic example. The Social Security taxes that people pay are used not only to pay current pensions but also to go into a so-called "trust fund" to pay future pensions. When the trust fund money is used to buy government bonds, that reduces the national debt -- on paper. But only on paper.

When $100 million in Social Security money is used to retire government bonds as they mature, this means that the public is owed $100 million less than before, which means that the national debt is reduced by that much. But of course the Social Security system is now owed $100 million dollars more than before.

This is where the accounting tricks come in. Money owed by one government agency to another is not counted as part of the national debt. So $100 million in debt vanishes into thin air, simply by being transferred from where it is counted to where it is not counted.

The government still owes the money. But it now owes it to the people to whom it has promised future Social Security pensions, even though technically it owes it only to another government agency.

What has happened is that the Social Security taxes that were supposed to go into a trust fund have in fact been spent by the politicians. The government bonds turned over to the Social Security system in exchange for this money change absolutely nothing. These bonds are just claims on future general tax revenues.

If the bonds never existed, future general tax revenues would still have to pay for Social Security pensions for the baby boomers, over and above the inadequate amounts that will be coming in from younger workers when the baby boomers retire. That is what will happen anyway.


Thomas Sowell

Thomas Sowell is a senior fellow at the Hoover Institute and author of The Housing Boom and Bust.

Creators Syndicate