Audit Notes: More Murdoch, Hiltzik on the Social Security Trust Fund

A couple of weeks ago, Allan Sloan wrote about Rupert Murdoch is using $673 million of his shareholders’ money to buy Murdoch’s daughter Elisabeth’s production company. That self-dealing caused him to say this:

It’s one thing to have News Corp. employ family members. But it’s a different thing to use assets of a company 88 percent owned by the public to buy businesses owned by Murdoch children. And we may not be done; Lachlan Murdoch still has his own company.

News Corp. preaches free enterprise. But when it comes to Murdochs, the company has a different value: family enterprise.

Today, Joe Strupp of Media Matters points out that News can’t even tell its shareholders the truth:

Here’s (Murdoch’s) Dow Jones Newswires:

News Corp.’s (NWS, NWSA) recent deal to acquire Shine Group is unrelated to News Corp. Chief Executive Rupert Murdoch’s family ties to the U.K.-based television production company, Chief Operating Officer Chase Carey said Monday…

“That had nothing to do with it,” Carey said of the family relationship, at an investor conference hosted by Deutsche Bank.

My question: Did Chase say that with a straight face? If so, Elisabeth might want to give him a part on one of Shine Group’s shows. Or do the Murdochs only do that kind of thing for other Murdochs?

— And speaking of Murdoch and his vast reach, The Nation editor Katrina vanden Heuvel writes about News Corporation and media consolidation in the Washington Post:

We tend to measure the influence of Rupert Murdoch’s News Corp. in terms of the reach of Fox News or the circulation of the New York Post and the Wall Street Journal. But it is actually local television stations on which Murdoch has built his empire and increased his stranglehold on access to information.

He has done so, in large part, by taking advantage of a 1999 change in FCC rules that allowed a single company to own more than one television station in the same market. That arrangement, known as a duopoly, lets big conglomerates such as News Corp. buy up stations, reduce their staffs and consolidate newsrooms. Murdoch now has nine duopolies. According to Santa Clara University’s Allen Hammond, a staggering 109 duopolies were created between 2000 and 2006…

The impact of media consolidation is not abstract. New Jersey has 566 municipalities, but the entire state has only two licensed commercial stations. When media conglomerates take control of those stations, consolidate their newsrooms, lay off reporters and duplicate coverage, it has the effect of creating a news vacuum across the state. Corruption goes unchecked. Local political issues with significant consequences go unnoticed.

The FCC is holding a hearing on Murdoch’s New Jersey station, but vanden Heuvel isn’t optimistic:

The FCC has shown a willingness, again and again, to disregard its own rules for the benefit of big media. In New Jersey, for example, News Corp.’s temporary waiver allowing it to own WWOR and the New York Post expired in 2008. But the FCC has taken no action.

— Finally, Michael Hiltzik has an excellent column about the Social Security Trust Fund and why it can’t be put in a lockbox. This is great historical context:

But here’s the dirty little secret about the “lockbox”: The very notion is based on a fundamental misunderstanding of how the program works. You can’t lock away a trust fund amounting to about $2.5 trillion from the rest of the economy — nor would you want to…

The question of where to park this money is a perennial headache. That was so even in 1935, when a proposal to build up a Social Security reserve first came before Congress — and when the estimate of its maximum size was only $47 billion.

“What in heaven’s name are you going to do with $47 billion?” Republican Sen. Arthur Vandenberg of Michigan asked a Franklin D. Roosevelt administration official. Informed that the government funds could be invested in the stock of big corporations such as U.S. Steel, Vandenberg exclaimed, “That would be socialism!”

Instead, Congress mandated that the money could be invested only one way: in U.S. Treasury securities, safe and secure. This remains the law today.

So the government borrows money from Social Security via those Treasury bonds and spends it on things like, say, the Bush tax cuts, wars, and economic stimulus.

When Social Security alarmists say the government has “squandered” the trust fund, they’re just expressing their opinion about the government’s budget priorities.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,