President Bush said he was "deeply concerned" about some of the
accounting practices in corporate America and called "outrageous" the
disclosure that WorldCom, which is $32 billion in debt, had hidden $3.8
billion in expenses.
The president added, "We will fully investigate and hold people
accountable for misleading not only shareholders but also employees."
The Securities and Exchange Commission (SEC) filed fraud charges
against the nation's No. 2 long-distance telephone company, as the company
slid toward bankruptcy. WorldCom is being called the biggest case of crooked
accounting in U.S. history, where it hid nearly $4 billion worth of expenses
from investors in order to make its bottom line look good. But is WorldCom
really America's biggest case of accounting gimmickery and deception? I
don't think so.
Ask the president or any congressman: How much debt does the
federal government owe? Nine will get you 10 that they'll tell you that it's
$3.5 trillion. If they had just a tad of sophistication or honesty, they
might add intragovernmental debt that'd bring the "total debt" to slightly
more than $6 trillion. Even that figure represents a level of creative
accounting, deception and lies that make the actions of Enron and WorldCom
seem like child's play.
Washington's deception about federal debt can be found in a
report by Andrew J. Rettenmaier, a senior fellow at the Dallas-based
National Center for Policy Analysis, titled, "How Big Is the Government's
Debt?" Rettenmaier says that, as of 2001, the accumulated federal
obligations to all people who've earned Social Security and Medicare
benefits are $12.9 trillion for Social Security and $16.9 trillion for
Medicare. Combined with the public and intragovernmental debt, the total
federal debt burden is an unimaginable $35 trillion. That amounts to roughly
$120,000 for every man, woman and child in America.
It will be impossible for the government to pay that kind of
debt. Washington will do what all governments do when it cannot make good on
its debt. Congress will repudiate agreements with creditors by refusing to
pay on agreed-upon terms or choose government's traditional method of
repudiation -- inflating the currency.
There's no question that both Enron and WorldCom engaged in
deceptive and dishonest practices -- in a word, fraud. Here on Earth,
there'll never be the end to deceptive and dishonest practices,
notwithstanding supposed protection by the SEC. We're going have to wait
until we get to heaven for total honesty. But let's compare what happens
when deceptive accounting practices are discovered in private industry
versus when they're discovered in government.
Without the SEC, the supposed guarantor against corporate
hanky-panky, lifting one finger, the market has exacted high penalties.
Enron and WorldCom shares of stock and their reputations are virtually
worthless. Heads have rolled.
By contrast, what happens when Congress cooks the books and
deceives Americans into believing that government debt is $3.5 trillion or
$6 trillion, when it's really $35 trillion? Absolutely nothing.
I bet that if you brought this up to one of our Washington
politicians, he'd say: "That Williams guy doesn't know what he's talking
about. What we owe to Social Security and Medicare recipients is not debt."
Of course, Enron and WorldCom might get out of their troubles by
redefining what debt is as well -- but the economic arena, unlike the
political arena, doesn't play that.