Posted on 02/05/2009 6:35:52 AM PST by shortstop
It’s ironic that on the same day the president set a $500,000 cap on executive pay, his campaign manager signed a book contract for more than $1 million.
Actually, it’s more than ironic.
It’s hypocritical.
When a president who – in 2007, the last year he was truly employed – made $4.2 million in a year, says that others are greedy for getting more than $500,000, it’s a pretty good example of “do as I say, not as I do.”
Barack Obama’s pick for secretary of Health and Human Services – Tom Daschle – had to step down because he had unpaid tax on free car service that totaled $128,000. If that was the tax on it, how much was it worth? When you have an unpaid tax bill – for your limousine and chauffer – that’s three times the national median income, you’re not really one of the “common people,” are you?
And it is odd that an administration of millionaires is attacking people for being millionaires.
More importantly, it is stunning that in the United States – a supposed land of liberty, checks and balances, and a free economy – the president can, by simple declaration, set a maximum wage.
It’s a Marxist’s dream come true.
The background, of course, is that the president has been very indignant about what he calls the excesses of corporate executives. They travel in private jets – like he has for the last two years – and they make more than a million dollars a year – like he does – and they get bonuses for their jobs – like his wife did at her last job.
And they’re wrong.
The worst part, he says, is that the executives of banks and companies taking money from the government are sometimes getting bonuses. To stop that, he has put a cap on their compensation. Unless it’s some stock option or deferred payment that’s put off until every dime of government money is paid back, no big boss at any of those companies can make more than $500,000 a year.
Which makes a lot of people happy.
But it shouldn’t.
Because of its practical impact, and its theoretical implications.
Let’s take the last part first.
Karl Marx taught that those who make little should envy those who make much. Much of current American politics is based on that principle, that we should hate the rich – which is anybody who has more than we do – and we should believe that they have what they have because they stole it from us.
That’s why CEOs are the current villains of American society. Instead of being admired or congratulated on their success, they are vilified and held up as boogie men, the scapegoats of our economic angst.
So the president caps their salary.
No executive order, no resolution from Congress, no bill passed and signed into law – nothing whatsoever that can be challenged by due process – just the word of the president. “Thus saith the Lord” had been trumpeted across the land and the cap is set.
Which sets a precedent that any wage can be capped. The free market has been decapitated.
And everybody is glad.
Because it is immoral for anyone to make that much money in times like these.
Which ought to be big news to the NBA and the NFL, and to all the Hollywood blowhards who bankrolled this president’s campaign.
In America, wages are supposed to be determined by what the market will bear. Typically, those who administer multi-billion-dollar companies are paid handsomely. Not many people know how to do it, and it takes years to develop the ability.
Doctors make huge amounts of money, architects make huge amounts of money. Both those professions take years and years to acquire. Business owners whose companies are successful make a lot of money. Inventors of useful and marketable items make a lot of money.
But now American business has a wage ceiling. And the various bailouts – passed or planned – will spread into so many areas of the economy that this cap almost becomes nationwide. In one fell swoop, the president has capped the salaries – and consequently limited the impact – of a group of people who mostly didn’t vote for him.
That’s some nasty payback.
And it is going to have some nasty consequences. Right when American needs experienced business people and bankers to help it dig out of a potentially monumental mess, the president has decided to punish them. He has also created a situation that will push some of them to foreign companies. If American companies have a wage cap, and a foreign business or bank comes offering more, what is an executive going to do?
And why would a skilled banker or businessperson push to get to the top of their profession when it contained a wage cap? Most Washington lawyers make more than $500,000 a year, most former-politician lobbyists make more than $500,000 a year, so why would a very talented person want to stay in the corporate world?
And finally, given that the largest portion of New York's state income tax comes from Wall Street salaries, the attack on bonuses and the cap on wages kills a revenue stream for a state that is teetering on the far side of bankruptcy.
At the same time the president is pushing a $900 billion package of pork for his Democrat colleagues and constituents – a bonanza of liberal special-interest money that will feather Democrat nests for years into the future – he is feigning indignation at people who are making just about the average of his cabinet members’ pre-government salaries.
This isn’t change, it is demagoguery.
Last week he attacked Wall Street bonuses, though he clearly must know that those are merely commissions, a conventional part of compensation for lower-level brokerage employees. This week he attacked banker salaries, knowing that almost all CEOs who have asked for public money have already lowered or eliminated their salaries and ended all perks.,p>
It’s grandstanding.
And it’s a dangerous precedent.
Because the last major country to have a salary cap was the Soviet Union.
Since Congressmen and U.S. Presidents also suck from the hind, teat, I think we need to limit Bill Clinton, he can’t make more than 500g all year, he needs to charge LESS for his speeches.
I don’t like the idea either, but when business decides to use public money instead of letting capitalism work as intended, then, as a “shareholder”, I agree with caps on salary. Who was it drove the company into this situation in the first place?
Well, the gov't mandated CRA stuff had a lot to do with it.
...
It’s hypocritical.
Did Obama's campaign manager go on welfare like these banks did? No, he didn't. As a result, He's entitled to make as much as he damn well pleases on any legal business deals in which he involves himself.
I’m conflicted on this. I do think executive compensation has gotten out of hand, and not contingent upon the actual success of the company. I attribute alot of this to shareholder apathy. With the rise of the 401K and mutual fund, we have created a class of investors who don’t really ‘know’ what companies they are invested in, and really would find it difficult to move money out of one stock, if they thought the CEO was making too much money.
Of course none of that matters - we are talking about one man dictating the salaries of others. I do think that, as an ‘investor’, the government should have input...but only to the extent that they are invested in these comapanies.
One positive byproduct of this - these banks now have an incentive to pay back their TARP money sooner, rather than later....or not at all.
I agree. The bailouts were of course a bad idea to begin with and should be frozen ASAP. However, the bailouts are a reality for the time being and it seems right to me that executives feeding at the public trough should have strict limits placed on their compensation. Only after they have stopped collecting public money are they entitled to whatever pay is approved by shareholders and the board of directors. And in fact strict limits on pay is a good motivator for these executives to put their businesses back in order and stop begging for public funds, even if its not as good of a motivator as ending the bailouts immediately.
Uh, WE’RE paying their salaries! If they’re using my money, they sure don’t need to live high on the hog with it.
I actually agree with this part of the plan. These are failed companies using taxpayer dollars. Once they become profitable again, this stipulation will go away.
The head of the FBI dosen’t get a multi-million dollar taxpayer-funded bonus.
In truth, the “maximum wage” DOES only apply to corporations which are bellying up to take MY money from me.
(Of course, it’s probably just the beginning)
I’d prefer NO “bail-outs” and NO salary caps.
But, if I HAVE to live with the one, I don’t mind the other being imposed on those who are stealing my money.
It sure was great while it lasted.
Agreed.
Actually, yes, they did!
Bawney Fwank said that this cap could encompass ALL businesses.
Barney Frank: TARP’s comp curbs could be extended to all businesses
Would be part of broader bill limiting hedge funds, credit-raters, and mortgage securitizers; ‘deeply rooted anger’
By Neil Roland
February 3, 2009 3:01 PM ET
Congress will consider legislation to extend some of the curbs on executive pay that now apply only to those banks receiving federal assistance, House Financial Services Committee Chairman Barney Frank said.
“There’s deeply rooted anger on the part of the average American,” the Massachusetts Democrat said at a Washington news conference today.
He said the compensation restrictions would apply to all financial institutions and might be extended to include all U.S. companies....
http://www.financialweek.com/apps/pbcs.dll/article?AID=/20090203/REG/902039977/1003/TOC
This is typical of a government that allows the Energy Dpeartment to consume $24 billion a year to stand in the way of energy development and then taxes away the profits of the oil companies to pay for it.
Wrong.
Ironically, most CEOs probably did vote for 0bamessiah.
First, the cap is only on the tax deductability of the first $500k of salary. If a company wants to pay more they can do so but will not be able to expense it.
Second, only 'C' level employees and division Presidents are included.
Third, benefits are not included (ie, options).
Fourth, companies that already took TARP monies are excluded.
Fifth, it assumes that the execs who ran the company will stay with the company. Why would they if they could get exponentially higher pay by jumping to a non-TARP company. Which leads to...
Sixth, how will TARP companies compete for the best talent to replace existing execs if they are limited in the compensation offer?
The law of unintended consequances would take effect big time on this. Our financial industry would move to London, Dublin or Toronto leaving us nothing.
In order of culpability:
1) The Federal Reserve
2) Congress
3) Fannie Mae, Freddie Mac
4) ACORN
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