MISSOURI WATCH: A HOMILY ON GOVERNMENT: SMALL WORDS ARE IMPORTANT

Priests and ministers in their pulpits have a way of converting a few lines of text from the Bible or other holy book into a full blown commentary on life's vicissitudes. In the secular world, columnists rely on day-to-day events to draw conclusions that may or may not be relevant or even logical, while economists expound at lengthy, typically drawing on a long text or even a book. Adam Smith's Wealth of Nations is cited much more often than it is read.

This columnist, for this piece, will mimic the preachers. Two very short texts are chosen. Both are from Newsweek magazine of January 20. One calls for adjusting Social Security payments for "true rate of inflation" and "true cost of living." The second is the line of Jane Bryant Quinn that new inflation-indexed Treasury bonds are "the safest bonds ever."

The first of these texts ties into the announced finding of a study committee headed by Michael Boskin, former adviser to President Bush, that the official data on the inflation rate have overstated the true rate by 1.1 percent. That startling statistic translates into a possible saving of $1 trillion in Social Security pay-outs over the next 12 years, according to economist Evan Thomas.

Jane Bryant Quinn calls the new Treasuries "safest" because, no matter what happens to the inflation rate, their principal will keep pace. Quinn doesn't do a crossover to ask which inflation data are to be used. Manifestly, if the data goes down, the bonds will not add principal so fast.

What moral is to be drawn from the two texts? In preacher fashion, it could be phrased as the importance of small things in human affairs, including government -- the unfamiliar, unadvertised, little matters. Or call it the imperiousness of the trivial. The adjustment issue almost invites mockery. Maybe the 1996 inflation was 2. 2 instead of the 3.3 percent officially reported. Who is affected? Skin on whose teeth?

The Thomas figure on a 12-year compounding of Social Security savings ought to be convincing. Also significant is the built-in conflict of interest. The $1 trillion "savings" to the Social Security program -- and taxpayers -- is an equal loss to recipients. Neither category of Americans looks at $1 trillion indifferently.

The new brand of Treasury bonds likely will carry about the same combined return to investors as the traditional unindexed bonds do. So issuing the new bonds could, on the surface, be called another ho-hum affair. In fact, many bondholders prefer to protect or add to principal; they are less interested in current income.

But the situation is not that pat. From the standpoint of the investor, Mrs. Quinn herself admits (although not in these words) that the investor is playing a lottery -- gambling on what the future inflation rate turns out to be. The greater hidden meaning, though, bears not on investors but government.

Quinn could have pointed out that inflation-indexing of bonds guarantees that the federal debt obligation will increase in step with inflation. That's an important point, it would seem, and one can suspect she omitted this fact because it detracts from her arguments. In past years the government could pay a fixed interest and principal on steadily depreciating dollars. It was the best debt-restraining gimmickry the government had. That will not be the case with inflation-adjusted bonds. If the price level keeps increasing, so will government debt. Surely no one would preach that.

Now a little more preaching about the first text -- Mr. Thomas's calling the Boskin inflation data the "true rate." Those data are no such thing. There is no such thing as a "true" inflation rate, just as, in agriculture, there is no "true" figure for the cost of producing farm products.

In government activities of all varieties, there are few if any absolutes. Almost always, the best that can be done is to apply approximate data to reasonably well chosen program designs. Mr. Thomas's pitch is far off the mark.

And now, like a good preacher, let's end with a prayer. Let's us pray that, for the sake of the common man -- the low and middle-income workers and members of their families -- that the devil does not lurk in the details of shrinking Social Security or betting on more inflation in the economy.

Amen.

~Jack Stapleton of Kennett is the editor of the Missouri News and Editorial Service.