The Budget: Another Enron?

Disappearing surpluses and retirement funds in peril? Sounds like a job for Enron. In his latest Against the Grain commentary, CBSNews.com's Dick Meyer takes a fresh look at budget politics.

"I think we are slowly Enronizing the economy, Enronizing the budget."
– Senate Majority Leader Tom Daschle

The verb, "Enron," has two definitions in contemporary usage: 1. to conceal or disguise financial and accounting facts; 2. to allow or cause retirement funds to be diminished, mishandled or swiped.

There is no doubt that Sen. Daschle is correct that the budget is being Enronized according to the first definition. What else can you conclude when $4 trillion of surplus budget dollars disappear? That's right, trillion, with a t and an r.

Last January, the Congressional Budget Office projected that from 2002 to 2011, the government would rack up $5.6 trillion in surpluses. This January, CBO made a slight revision and now predicts the surpluses will total just $1.6 trillion. Oops – off by $4 trillion. And the feds don't even use Arthur Andersen for their audits.

Surpluses disappear when yearly budget deficits appear. Last year, CBO predicted that the 2002 budget would run a $313 billion (only a b) surplus. They've now turned that into a $21 billion deficit. Missed it by that much, Maxwell Smart might say, thumb to forefinger. Take that, Ken Lay.

Fortunately, it is not written in stone that the second definition of Enron will come to pass; that Social Security and Medicare funds, in essence, will be raided to pay for growing expenditures during this period of declining revenue. It is not inevitable that the national 401-K is going to be Enroned. But it is a legitimate worry.

Certainly we are all shocked, shocked to discover flim-flam in budget numbers. The surplus shrank so far and so fast not really because of cooked books, but because the economy tanked much more than the predictors thought, because taxes were reduced and because spending unexpectedly increased after 9/11.

The big point is this: whether the result of Enronism or regular old rosy scenarios, the current budget snapshot has the potential to determine the federal spending portrait for a generation.

The situation today is similar to 1981, when large tax reductions, increased military spending and a sputtering economy spawned budget deficits that dictated policies and politics for another decade and a half. (This is where the diehard supply-siders stop reading and send off irate e-mails saying the Reagan tax cuts had nothing to do with deficits.)

Too often, elected pols pretend that deficits and surpluses are all about economics and not about policy. Both parties talk like only they have the secret knowledge of what mix of tax and spend will make business roar and jobs bloom. Democrats try to sound like businessmen and talk about how deficits destimulte the business cycle and threaten Social Security trusts in the out years. Republicans say surpluses are a sign that we're over-taxed and have no intrinsic virtue. Both have a point.

And both sides are reluctant to say what matters most to them about deficits and surpluses. Democrats like surpluses because they make it easier to promote spending programs they think are important. Republicans like deficits because they make that kind of spending more difficult and limit the size of government.

Once upon a time, the Democrats were pegged as the deficit spenders and the Republicans were the uptight balance-the-budget crowd. Those traditions make the parties' current approach to the renaissance of red ink seem contorted and phony.

The impulse of the Daschle-Kennedy wing of the party is to call for raising taxes or delaying tax reductions, which they justify by saying it's what the economy and job market needs. Well, it's pretty hard to convince Americans that raising taxes in the middle of a recession is a good idea.

Their Plan B argument is that raising revenue now is necessary to save Social Security later. A better argument, but it doesn't trump the resistance to boosting taxes during hard times. And it's not going to happen this year. It's not part of the solution and their calls for fiscal responsibility ring a bit hollow.

President Bush's reaction to the dwindling surplus is kind of a "What, me worry?" strategy. Sure, we can keep cutting taxes, heap on the spending for the military and homeland defense, pay off the debt and save Social Security all at the same time. It just defies arithmetic and at least one strand of the party's heritage. And as his pal Ken Lay should have taught Mr. Bush, the fat lady eventually sings.

We should not kid ourselves that the lessons of Enron apply solely to business. The vanishing $4 trillion and continued precariousness of Social Security and Medicare should set off alarms. Otherwise, the taxpayers may be the ones getting Enroned.

E-mail your questions and comments to Against the Grain

Dick Meyer, a veteran political and investigative producer for CBS News, is the Editoral Director of CBSNews.com, based in Washington.

By Dick Meyer