The Piper Presents His Bill
February 5th, 2009My Bet: the Dance Will Continue
I have questions for my fellow conservatives.
If the government barges into a private business that doesn’t take government money, and it tries to set a limit on the CEO’s pay, that’s interference with the right to contract, and it’s (at least currently) unconstitutional. But if your company is a failure, and you greedily rush the trough when Uncle Sam offers to take other people’s money and give it to you, so you can escape the justice of the free market and avoid the consequences of your incompetence, and Uncle Sam tells you that you have to have a salary cap, how is THAT interference with the right to contract?
It’s not.
In fact, it IS a contract. Uncle Sam gives you money, and in return, you agree to a salary cap. And such other conditions as Uncle Sam chooses to impose. For example–and I think it’s a shame this hasn’t occurred to Obama–the government might make you go to work every day in a chicken costume.
Conservatives hate welfare, or at least we hate giving welfare handouts to people who don’t deserve help. We are constantly clamoring for oversight, and we love yelling that the government needs to put conditions on welfare money. I have to ask, then: if the government is giving welfare to companies which are unquestionably undeserving, why shouldn’t it put conditions on the handouts?
It should. That’s the very least it should do.
It’s an embarrassment, the way some conservatives are complaining about the caps. It shows they can’t tell the difference between independent private businesses and charity cases.
The executives affected by the Obama salary cap have a lot of gall, complaining that they’ll have to suffer with the paltry sum of $500,000 per year. In a capitalist country, they’d all be out of work. That’s where they should be. They’re just going to continue running their companies into the ground. If they were capable of succeeding, they would have done so already. Guess what the salary cap for successful CEOs is? THERE ISN’T ONE. If you want unlimited compensation, all you have to do is turn a profit. If you can’t do that, shut up.
The bailouts will prolong our economic problems, because they will keep inept people in control of major businesses, and they will also permit overpaid workers to continue charging too much for their work. They’ll also hurt good businesses by preventing them from taking the places of their failed competitors. In a healthy economy, bad companies fail, and good companies take their places, and everyone is better off. In the Bush-Obama socialist utopia, we keep bad companies alive and prevent good companies from replacing them. It’s like having the opposite of an immune system. We are generating antibodies to success and attacking it without mercy.
If Bush and Obama were running the NFL, Terry Bradshaw would still be starting quarterback for the Pittsburgh Steelers. In an iron lung, if necessary. Ben Roethlisberger would be working at a gas station, because his youth and superior ability would not suffice to overcome the NFL’s discriminatory and counterproductive retention policies.
It reminds me of the comic strip business. What do you see when you look at the comics page? Dead people. Or at least their work. You see Peanuts and Li’l Abner and BC and so on. The artists are dead; some have been dead for decades. It’s disgusting and pathetic, but it’s also tradition.
Some of the dead people are clearing out; I think they finally got rid of Beetle Baily, for example. But there are still a good number of strips by dead people on the comics pages. Why is this a problem? It’s not, unless you’re a cartoonist. It makes it harder for talented new people to make it. It’s as if movie distributors were cluttering up screens with old films like City Lights and The Jazz Singer, to the point where the studios had a hard time marketing new work.
The only cartoonist I know of who has had the guts to complain publicly about the dead people is Stephan Pastis, the guy who draws Pearls Before Swine. He openly makes fun of bad strips that have no business on the funny pages. I’ll bet there are a lot of dead-cartoonist heirs who hate his guts, because he is threatening their meal tickets.
I guess that’s irrelevant to discussion of the bailouts, except that it illustrates what happens when competition is impossible. We lose good products. We punish people who try to create them, and they quit.
The execs are complaining now, but my depressing knowledge of human nature tells me that won’t last. Why? Because the thing every bureaucrat and desk jockey hates more than anything is the free market. The thing they love more than anything is job security. And bailouts equal job security, for people who, by all rights, should be unemployed. We will see a contest between two primal drives: greed and the desire to be taken care of. I believe the desire to be taken care of will win. The general public hasn’t bought into it completely; we still favor capitalism by a slim margin, probably because many of us are not doing as well as we want, and we think capitalism gives us a chance to do better. But people who are already in cushy positions have a different view. They are desperate to keep what they have. It’s like musical chairs. If you’re sitting down, you don’t want to hear the music start up again.
We are living out Ayn Rand’s worst nightmare. A world in which competition, which is our strength, is considered destructive and dangerous. If Ellsworth Toohey were brought to life in the flesh, we would probably elect him President. In fact, we may have just done that.
Hard times push people in one direction or the other. The right direction, or the direction of socialism, which is a secular religion which assures that hard times never go away. Under FDR, we veered too far to the left, and it damaged our system and prolonged our misery. Maybe Obama will finish his work and drive us so deep into Marxist territory we will never find our way out.
Like I’ve said before, welcome to the Second World. Liberals think Western Europe is paradise. I hope they’re right, because our standard of living is probably going to be just like Europe’s. And I don’t mean Switzerland.
Anyway, the salary caps were to be expected. When the government began investing in failed businesses, every intelligent and insightful person on earth realized the government would come to control those businesses.
Of course, the CEOs who are taking the hit were not intelligent and insightful. If they had been, they would not have destroyed their companies.
February 5th, 2009 at 10:32 AM
1. You may be right about Ellsworth Toohey. We should know in a relatively short period of time.
2. Love the chicken suit idea.
V/R JW
February 5th, 2009 at 11:21 AM
Outstanding, outstanding post.
Particularly liked the Ellsworth Monkton Toohey reference.
Have you ever read “It Can’t Happen Here” by Sinclair Lewis?
Believe some of that book has sprung to life these days too.
February 5th, 2009 at 11:26 AM
look at the wall street journal’s article today about the Merrill Lynch being forced upon Bank of America by the USG; they threatened to forced resignations if they backed out of the deal.
when a company cant scrap a merger, you’ve passed a milestone.
there are several thoughts that strike me here, but the first is: if you have an economy whose success hinges upon a struggloing bank buying a collapsed investment bank, there are signal problems.
in other words, ayn rand debates are for another day.
the economic construct whereby Merrill got so ill, (actually having covered the firm for a decade it was merrill’s mismanagement and inept regulators) in the first place is a better starting point.
February 5th, 2009 at 11:29 AM
If a doctor takes money from the government (Medicare), can he have a cap placed on his earnings?
Trust me, I’m shedding no tears for those boneheads on Wall Street…but I just think that this can lead to someplace we don’t want to go.
February 5th, 2009 at 11:40 AM
Thank you for expressing so well what I have been trying to put together in my mind for the last 24hrs. As a capitalist, I believe that even though I could feed at the trough I am still completely against the $900b socialism bill now being considered.
Incidentally, $900b worth of $1 bills laid end to end equals about 85 million miles, or 90% of the distance to the sun (assuming a 6″ length). Also, at today’s rates, it would be 900 million ounces (56 million lbs) of gold – enough to make even Auric Goldfinger sick.
February 5th, 2009 at 11:55 AM
“in other words, ayn rand debates are for another day.”
.
I don’t know what point you’re trying to make. That’s what people who don’t really believe in capitalism say. “We’ll be capitalists when it matters, but today we’ll be socialists, because we’re scared.” The truth is, it matters most when times are hardest. We are nationalizing our companies, regardless of the terminology we use to describe it, and the government (which can’t manage its own affairs) is now running them. And as more businesses fail (they will), more bailouts will take place; “fairness” will be invoked to make it happen. As a result the tax burden will increase, and the competence of the the people in charge will actually decline, because they won’t even be businessmen. They’ll be government bureaucrats who are even more useless than academics. More losses, more bailouts, less competence, more taxes…it will be like the meltdown in Atlas Shrugged.
,
“If a doctor takes money from the government (Medicare), can he have a cap placed on his earnings?”
.
Medicare has a fee schedule already. And it’s a great idea. Medicare is socialism, and it has to be limited, especially as Americans get older. Socialism is a collection of Ponzi schemes. They will eventually be reined in, whether by intelligent government or by the simple limits of what is mathematically possible.
.
“I just think that this can lead to someplace we don’t want to go.”
.
We’re already there. We arrived when Bush approved the bailouts.
February 5th, 2009 at 11:59 AM
My father is a labor lawyer, and he tells a wonderful story about a meeting he attended. Ignorant union grunts were moaning about all the things they wanted, and an ordinary employee stood up, and she said, “You all seem to forget that before we can get all the things we want, somebody has to SELL something.”
.
The government is bailing water into the boat, not out of it. We should say “bailin” instead of “bailout.”
February 5th, 2009 at 12:08 PM
your post was excellent and your criticism of me was valid.
true capitalism has never really taken root with the US populace, let alone the government. People and institutions are desperately afraid of the consequences of adverse actions.
that said, whatever is left after this mess, we should at least make an attempt to put in a regulatory construct to prevent financial institutions from getting to a certain size.
February 5th, 2009 at 12:11 PM
I didn’t really criticize you. I read that WSJ piece, and I truly did not know what you were trying to say.
February 5th, 2009 at 12:23 PM
The only, minor, problem with your analysis is that it isn’t CEO incompetence that caused all this; it’s government incompetence.
February 5th, 2009 at 12:26 PM
The government caused the Big Three to design bad vehicles and pay way too much for labor? The government forced lenders to make loans they knew could not possibly work? I don’t think so. I think the government stupidly encouraged subprime lending, but in the end, the private-sector individuals did the actual damage. As for the Big Three, if they have an excuse, I have never been made aware of it.
February 5th, 2009 at 12:33 PM
There’s a very old saying – “If you take the King’s money, you’re in the King’s service.”
Granted, it originated with press gangs, which isn’t particularly pleasant, but in today’s case those taking the money aren’t being tricked into taking it. In fact, they’re demanding it.
As you point out, this is a contract, pure and simple. If I take the dough, I’m beholden to the terms attached to the receipt of it. If you don’t like the terms, don’t take the payment.
February 5th, 2009 at 1:11 PM
Steve channels John Galt.
.
…and notes we’ve become a nightmare out of the pages of Atlas Shrugged. And names names.
.
Steve? – This gem is why I’ve been reading you for years. Buying your books. Kept coming back, even when you were struggling for an even keel.
.
There was *nothing* un-Christian in your writing here. You can write without the snark you’re always so worried about, and be Christian in spirit and attitude and comport. Obviously. And this is an example thereof. Excellent.
.
Kudos.
.
Only one of the men hanging beside him on Golgotha that day accompanied him into eternity. Christ does, indeed, judge.
.
February 5th, 2009 at 1:13 PM
Wow, thanks.
February 5th, 2009 at 1:19 PM
Exactly correct. When you are on the dole (and these companies now are) – the government can dictate the rules.
All the more evidence why it is so pernicious to BE on the dole – and why the less government interference (in general), the better.
That being said, I do think that top executive compensation in many instances was way out of control. Given the immoral, selfish and irrational behavior of these executives, they are now finally getting their due.
February 5th, 2009 at 2:07 PM
All I will add is: Robert Nardelli and The Home Depot.
February 5th, 2009 at 2:35 PM
If you haven’t had the time to watch any of the press briefings, I’m able to tell you that there seems to be a growing level of frustration in the White House press corps–somewhat verging on being incredulous at some of the events that have happened in the first two weeks. And there’s the new President’s “I Won” terse attitude.
I’m afraid that there’s a moment coming like in the movie
“Wizard of Oz”–except in reverse–where everyting goes from the bright color footage in the minds of the media and the African American community to shades of dreary black and white (and that’s not intended to be racial black & white either.)
Liberal/socialistic policies are wonderful in the mind and on the tongue when you’re young and/or independently wealthy, but then reality sets in and they find out human nature and confiscation at gunpoint/government spending can’t implement programs which have failed over and Over and OVER throughout history in Europe and Asia.
February 5th, 2009 at 3:05 PM
Hi Steve,
Excellent post. Thank you.
Unfortunately there are precedents for govt. capping salaries. I enjoyed President Nixon freezing my salary just when I was due to receive a significant increase. I eventually got the raise but never forgave nor forgot that the govt. had interfered with me receiving the reward for my work. Look here to see an account of how it worked: http://www.econreview.com/events/wageprice1971b.htm
February 5th, 2009 at 3:07 PM
I forgot all about Nixon’s weird experiment.
February 5th, 2009 at 5:14 PM
Right on here.
If Obama wanted to be really snarky – and egalitarian – and such – he would cap the CEO pay at “x” times the lowest paid employee’s pay. Say 10 times. If teh CEO wants more, he’d have to pay everyone more. That might be some “stimulus”.
February 5th, 2009 at 7:07 PM
Another problem is that the only people who have the chance to become CEO’s are from an elite school old boy’s network. No matter how hard I worked or successful I was, I’m not “made” because I and my parents didn’t and don’t want to go to the same country clubs as the plaid golf-pants crowd.
Oligarchy is about maintaining and extending power, not about increasing the economic pie and riding their own profit growth as a result. The people who act and legislate and run businesses like they’re above the law need to be forcibly dragged down and their families shamed. A few prominent examples and there will be a chance of internal policing. Put the spouse’s Lexus at risk of a downgrade to a 1990’s Chevy and the kids’ private school on the block.
Pity that given the choice between slavery and revolution, most will take the former.
February 5th, 2009 at 7:08 PM
I disagree that the CEO’s weren’t intelligent. I think they’re plenty intelligent. But they have no moral compass. They were at the head of trying to bring in cheap illegal labor. They never cared about how the US will be in 40 years.
February 5th, 2009 at 7:43 PM
[…] The Hog isn’t doing politics any more. Nope. Wouldn’t think of it. The bailouts will prolong our economic problems, because they will keep inept people in control of major businesses, and they will also permit overpaid workers to continue charging too much for their work. They’ll also hurt good businesses by preventing them from taking the places of their failed competitors. In a healthy economy, bad companies fail, and good companies take their places, and everyone is better off. In the Bush-Obama socialist utopia, we keep bad companies alive and prevent good companies from replacing them. It’s like having the opposite of an immune system. We are generating antibodies to success and attacking it without mercy. […]
February 5th, 2009 at 9:48 PM
Undeserved entitlement…’twill be the downfall of many
February 6th, 2009 at 2:54 AM
“But people who are already in cushy positions have a different view. They are desperate to keep what they have. It’s like musical chairs. If you’re sitting down, you don’t want to hear the music start up again.”
Yea. The music starts when we drop out the bottom of a depression and hyperinflation begins (ie ‘The Wheel of Fortune’ will start to turn and social convection will begin once again). But that is a long way off being that we are only at the first stages of this economic downturn. The good thing is that it would force a lot of people who have money to start investing. Not a pleasant thought considering how broken the world economy is right now.
.
This may be a good time to hone your understanding of economics and tune in to investment opportunities.
.
…and who says history is dead.
February 6th, 2009 at 8:18 AM
Steve. Please keep writing. This is your calling.