Andrew Hofer is the first person I come across to note that the way Enron ran its business was very closely modeled on the way the Social Security Administration runs its ship.
Consider, for example, one of the more outrageous deals concocted by Enron to bloat is balance sheet. Enron entered into a deal with Blockbuster to rent movies over the Internet. The joint venture eventually went bust and Enron made no money off of it. But that did not stop it from claiming a profit.
To pull that off, Enron contracted with a second company that loaned Enron in excess of $100 million with the money to be paid back from the revenues that would be earned from the Blockbuster deal. So even though it never made a cent off the deal, Enron could report back to shareholders a $100 million in additional revenue.
These sort of shenanigans have rightly been criticized by many in the liberal and left wing press, but this is similar to the sham claim that the Social Security Administration has more than enough money to keep up with its benefit requirements — a sham which many liberal and leftist commentators have bought in to wholeheartedly.
In the case of Social Security, the SSA long ago lent that money to the U.S. Treasury to use on buying things like military jets and pork barrel projects for Trent Lott’s home state. In return all the Social Security Administration has is an IOU saying that at some point in the future, the U.S. Treasury will pay the money back.
As Hofer puts it,
The Lockbox, or social security surplus, is a fictional accounting entity full of I.O.U.s both from and to the U.S. Government that somehow increases its net worth and keeps nasty truths out of its financial statements. Same idea, huh?
One of the best first steps in making companies use honest accounting methods would be for the federal government to lead the way, and dispense with useful fictions like the Social Security “lockbox,” which make it appear like the program is far more solvent than it really is.
Source:
Lockbox Accounting. Andrew Hofer, MoreThanZeroSum.Com, January 28, 2002.