Consider the following bits of news:
1. The Democrats in the U.S. Senate are scheming to avoid taking full blame for increasing the federal debt limit to $13 trillion, as the federal government’s runaway spending now has the national debt sitting at $11.95 trillion as of Tuesday and the current debt limit stands at $12.1 trillion. The projected 2009 federal budget deficit is $1.4 trillion.
2. Kenneth Feinberg, the federal “pay czar” in charge of dictating who can make what at the seven companies the government now owns as a result of auto and bank bailouts, now says he’s imposing draconian cuts in executive compensation among the 25 highest-paid employees at Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial. The cuts involved could wipe out as much as 90 percent of salaries and as much as 50 percent of total compensation.
3. Meanwhile, the Federal Reserve is reviewing rules on compensation for executives at the 28 largest banks in the country so as to discourage “excessive risk-taking.”
4. While the government is doing what it can to lop off the top tier of incomes, it doesn’t seem very successful at creating incomes on the bottom tier. Council of Economic Advisors chair Christina Romer is now warning that “severely elevated” unemployment rates will be the norm for some time to come, while at the same time touting the Obama administration’s stimulus package as having produced between 600,000 and 1.5 million jobs. Other estimates say the stimulus has created more like 30,000 jobs. Romer admits that since the beginning of the recession in December 2007, payrolls have decreased by some 7.2 million jobs.
There’s a pattern here, and it certainly isn’t a positive one.
First of all, if as a reader your initial reaction is that it’s a good thing executives at all these bailed-out firms are getting hit since they were the ones who made a bailout necessary, let’s point out that (1) the Fed’s decision affects more than just bailed-out banks, and (2) not every bank which accepted federal TARP money did so through its unfettered free will; many of them were pressured to do so. If those considerations aren’t enough to overcome your class-envy zeal, I’ll say it was a stupid move to bail those companies out in the first place; poorly-run companies destroy wealth and the best thing for them is reorganization through bankruptcy so as to stop the bleeding.
But what is particularly galling is not the question of who is getting gored by the federal government. Wall Street executives aren’t the most sympathetic people around; they represent part of a failed elite in this country which is far more parasitical than productive and I’m all for diminishing as much of their power and influence as possible.
No, it’s who’s doing the goring here.
The Obama administration’s fiscal performance is far and away the worst of any presidency in American history. It has run up a deficit greater than all eight years of the previous administration combined while blaming that administration for the federal government’s poor fiscal situation. It has its minions in the Senate opening the door to ever-higher levels of federal debt when the debt burden per American household already sits at close to $100,000 – and projections are that this debt will nearly double (from $11.95 trillion to over $21 trillion) over the next decade. Projections also have the interest on that debt rising to over $800 billion per year.
In the meantime, this administration decided on a war strategy in Afghanistan back in March based on recommendations given to them by the previous administration. Obama trumpeted that new strategy at a press conference on March 27 of this year, and he changed commanding generals in the Afghan theater in pursuit of that new strategy. But after Gen. Stanley McChrystal outlined the resources he needs to pursue that strategy, the president has spent the last two months “dithering and waffling,” in the words of former Vice President Dick Cheney in a brilliant-but-caustic speech at the Center For Security Policy last night. To date, nearly seven months after announcing a new Afghan strategy Obama has not moved to implement or reject that strategy.
Obama blew $787 billion on a stimulus package which by any objective measure has been an unmitigated waste of money despite the administration’s countless attempts to spin it as something else. And he’s spending his time attempting to ram through a federal seizure of the medical sector that 54 percent of the American people reject while at the same time conducting a campaign of intimidation and defamation against Fox News and the U.S. Chamber of Commerce – not to mention continuing to push a cap-and-trade bill which will involve, among other things, a $3.6 trillion tax increase on gasoline.
Given this level of performance, I ask – is anyone in the federal government in any position to evaluate anyone else’s performance or decide what executives should be paid? I’m thinking probably not.
What it comes down to, when you stop to consider this, is incompetence. Given that the federal government used our tax dollars – or more accurately put, our children and grandchildren’s tax dollars – to bail out the companies whose executives Feinberg is now seeking to kneecap, shouldn’t it be incumbent upon our government to serve as a proper steward of those companies and do the things necessary to maximize the return on our investment? And wouldn’t it be prudent to insure that the people those firms need to effectively run their operations and return to sound financial health be paid the market rate? After all, when you lowball someone on salary it’s a matter of time before they leave for greener pastures. And companies unable to attract top management talent are highly unlikely to make sound decisions leading to profitability or good ROI on our tax dollars.
Obama and his Democrat lickspittles in Congress certainly aren’t imposing principles of austerity on themselves or others within the federal apparatus; they’re having a difficult time justifying the excesses in the federal budget and the resulting deficits discussed above. It appears those principles are only good for the private firms they’re in the process of nationalizing. I find that telling.
Of course, there is a much larger issue at stake here – namely, the assault on liberty represented by the actions the people in charge of our federal government are currently perpetrating. That anyone in Washington would feel it necessary to go beyond the confiscatory level of progressive taxation at the local, state and federal level to invade the pockets of high-demand employees at bailed-out or otherwise-regulated firms is not just evidence of impracticality; it’s tyranny. No one in government has the right, nor should they have the power, to dictate to a private citizen how much he can be paid through exercising his right to contract with another party. Property rights and the freedom to engage in economic activity are absolutely essential to American life and they are bedrock principles as set down in the Declaration of Independence.
This trajectory has to be fought – and hard. If it isn’t stopped, the American economy as a whole will be in the same shape as those bailed-out firms; namely, dead broke, drained of talent, direction and ambition, and in a state of permanent decline compared to hungrier and more aggressive competitors.