Published August 01, 2002
There's another financial scandal you may not have heard about. It's been going on for years, and makes Enron, GlobalCrossing and WorldCom look like kiddies pilfering nickels from the lemonade stand.
Over the past five years, this colossal firm spent $142 billion more than it took in — 12 times the cooked figures of Enron, Xerox and WorldCom combined, according to one watchdog group. In 2001 alone, inept accountants completely lost track of $17.1 billion in investor capital.
The Washington Times reports that the firm employs shady accounting gimmicks like "forward funding," in which expenditures for the current year are allocated to the next fiscal year to get around spending limits. Once the calendar turns, the firm then reallocates those expenditures back to the previous year.
The firm routinely borrows from the pension fund it requires all its shareholders and investors to contribute to — a violation of most state laws. It borrows from some departments to pay off the debts of others. It rewards the failures of its subsidiaries with more funding and more staffing. It rarely if ever disbands or dissolves failed endeavors. Instead, it often spins off new offices to address problems current offices are failing to solve, giving rise to jurisdictional and bureaucratic nightmares.
The firm's officers habitually procure money from the firm's treasury for projects benefiting small pockets of investors -- most always at a cost to the body of investors as a whole. Those officers are then rewarded when that small pocket of investors allows them to keep their jobs.
As you've probably guessed, this "firm" isn't Microsoft or Wal-Mart or General Electric. In fact, it isn't a firm at all.
It's the United States government, your government.
And here's the irony of ironies: That same government has regulatory power over the accounting practices of private corporations. Now, politicians, pundits and editorial pages are pining to give this government even more oversight power.
Talk about chutzpah.
When a private company fails its investors, that company usually goes out of business. But when a federal agency fails, it gets a bigger budget and more staff. The federal government continues to fund two businesses that are by all measures unqualified failures (the U.S. Post Office and Amtrak). One of those businesses even has a state-granted monopoly. Even so, both of them bleed money, and are rewarded for their mismanagement with more public funding. This is oversight?
Citizens Against Government Waste reports that the federal government made $12.1 billion in improper payments through its Medicare program alone. That's billion. And the government regularly raids Social Security, which it has long misleadingly told us was a "pension" or "trust" fund. Corporate officers who raid pension funds go to jail.
The hypocrisy here is dumbfounding.
For example, while Senate Majority Leader Tom Daschle berates cold-hearted corporate America before the television cameras, his wife lobbies the halls of Congress on behalf of those very same cold-hearted corporations.
House Minority Leader Richard Gephardt also beats the corporate responsibility drum. But Gephardt once took a low-interest loan from DNC Chairman Terry McCauliffe under terms that his rural Missouri constituents could never get from the bank.
McCauliffe himself turned a $100,000 investment in failed GlobalCrossing into a cool $18 million. To my knowledge, McCauliffe has yet to offer any of that 18,000 percent return to struggling GlobalCrossing pensioners. No, instead he's sending out press releases declaring Republicans to be in bed with big business.
President Bush recently scolded corporate America in an overtly political speech. In it, he called for the abolition of "sweetheart" executive loans — the very kinds of loans he himself benefited from while a director at Harken Energy.
We've seen senators and congressmen line up corporate executives for committee hearings, where they unleash invective and vitriol in plain view of television cameras. But once the cameras are off, those senators hop aboard chartered planes from Washington to hideaway retreats, paid for by ... private corporations.
And let's not forget that most of the abuses we're reading about today go back to the 1990s, when the president — the country's CEO — arrogantly and shamelessly lied to the American people. Should we be surprised, then, that CEOs at the time were also lying to their stockholders?
We tend to take our inept federal government with a grain of bemusement. But why? Why do we give government a pass, but then feel outrage when WorldCom makes the New York Times? Everything about corporations, after all, is voluntary. Nothing about government is.
Investors can put their money elsewhere. Employees can take their talents and skills to another firm. The market offers customers dozens of competitive options. Bad companies will eventually fail, and good companies will thrive.
But we're stuck with one federal government. We're obligated by law to pay taxes. There's no alternate government we can "invest" in. And because we're entrenched in a two-party system, "voting the bums out" isn't much of an option either.
We shouldn't be amused by the ineptitude of government; we should be outraged. The idea that an institution as fundamentally unaccountable as the federal government might be given even more power to hold the private sector accountable is, to say the least, laughable.
But hold your chuckles. Because it's about to happen.