The Rise of the Mob Economy
What's more infuriating, a government "pay czar" who can dictate the salaries of private-sector citizens or some corporate welfare queen who has the nerve to complain about a salary cut?
On a gut level, it's a tough call. Watching the same swine who begged for charity after spearheading the devastation of their respective companies take massive salary cuts is thoroughly satisfying. Yet in a broader sense, this unprecedented intrusion into the economy accomplishes nothing -- well, other than setting an array of dangerous precedents.
Who knew? Chicken-little governance comes with a steep price tag. Could anyone have imagined, even two years ago, that an unaccountable pay czar -- Kenneth Feinberg -- would have the authority to dictate the salaries of private-sector employees?
Yes, these companies were at the taxpayer trough. Which means that firms that accept aid from Washington should consider the "assistance" analogous to the help offered by The Godfather at his daughter's wedding. You're in for life. Existing contracts have no real value. A single political appointee may have the power to decide what you're worth.
And what if the companies that accepted bailouts -- Citigroup, Bank of America, American International Group, General Motors and others -- never pay back taxpayers? Do they answer to the White House in perpetuity?
To the astonishment of absolutely no one, Neil Barofsky, special inspector general for the Treasury, tells us that the American taxpayers aren't likely to recover hundreds of billions of dollars they "invested" to bail out financial institutions, Detroit automakers and bubble-inducing homeowner programs.
"While several TARP recipients have repaid funds for what has widely been reported as a 17 percent profit," Barofsky further explained to a Senate committee recently, "it is extremely unlikely that the taxpayer will see a full return on its TARP investment."
If TARP recipients are under the thumb of a pay czar, what about other corporations consenting to Washington aid or accepting contracts -- a group that grows with each misguided stab at stimulating the economy? And why stop there? Why not make all compensation fair?
"I don't think that's healthy, and I don't like it," Camden Fine, president of the Independent Community Bankers of America, said of the pay czar's cuts. "These are decisions for boards of directors to make, not the government. I think this is a very slippery slope."
Who greased this slimy incline of government intrusion by begging for handouts? They did. Yet the slippery slope argument is difficult to deny when The Wall Street Journal already reports that New York Democrat Chuck Schumer plans to press for legislation extending the pay czar's governance to all publicly traded companies.
Let's not forget that the compensation of many of these CEOs would have ended up at absolute zero had the market dictated their terms rather than Washington. Today many CEOs no doubt feel comfortable taking outsize bonuses and compensation exactly because they know full well that failure is not an option. Washington won't allow it, artificially propping up incompetence.
"If the administration actually follows through," writes Alex Tabarrok, an economist at George Mason University and blogger at the popular "Marginal Revolution," "most of these executives will quit and get higher paying jobs elsewhere. Executives not directly affected by the pay cuts will also quit when they see their prospects for future salary gains have been cut. Chaos will be created at these firms as top people leave in droves. Will the administration then order people back to work?"
Hey, why not?
Despite this undercurrent, the administration continues to expand needless intervention and "investments" into the economy that offer only the illusion of safety and a reality of stagnation.
And that's exactly what empty words, unlimited taxpayer funding and uninhibited regulatory power can buy you.
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