The effect of limiting compensation will be to limit overall economic productivity and lower everyone's prosperity.
If you get to put a ceiling on my compensation, then I'll just take my hard work and creativity to a place where you can't do it or I'll just stop working so damn hard.
And in terms of casting a glance further out, there's a lot of reasons for a wealthy, elite alpha male to want to be based in America, in a city like New York for example, rather than in a regulation-free outpost in the developing world.
What about the other looming danger -- will they just "stop working"?
Basically, will the incentive to work hard and advance one's career dissipate if the current top rewards are limited? Does history provide any suggestion that this is so?
Today's top rewards, and their proportion to regular/average wages, are unprecedented in post-war history. You'd have to go back to the twenties to find such an imbalance. Top-of-the-top wages and bonuses have multiplied over the last fifteen years. Has that gone accompanied by a work ethos multiplied by the same factor? No.
Did ambitious career animals like that just not work or not work hard before today's exorbitant CEO pay was in place? No.
Go back to the fifties and sixties and look at what the top tax rates were back then. Talk about limiting the compensations that the wealthiest would get for their work; an 80%+ top tax rate imposes quite the limit. Did it result in stifled economic productivity and prosperity? No, those were decades in which both grew at an impressive rate.
If CEO pay is scaled back, one way or another, to the kind of proportion it was in even just 10 or 15 years ago, ambitious alpha (fe)males will work no less hard to become or stay a CEO.
The idea that limiting top pay from, I dunno, 1,000 times average wage to 500 times average wage will make those people want to just "stop working" is ... well, OK, I'm just going to call it for what I see it: ideologized, libertarian scare mongering. And framing proposals aiming at such ends as a question of, as you put it, "the tyranny of the masses limit[ing] all of our dreams" is just demagoguery.
i noticed that on several threads posters have asked : "where is the money going to come from ? " . [..]
i have not heard any member of congress , senator , the secretary of the treasury or the president say : "we will raise the money by ... (fill in what you think is the right answer) " .
the possible answers might be : stopping the war in iraq , have specified tax increases , eliminate all subsidies to ... (again , you fill it in) .
to me all the talks are just a lot of hot air . i haven't heard anyone in washington make suggestions to truly deal with the crisis .
Been wondering the same thing hamburger. (Also while keeping track election campaigning where raising taxes seems to be a major no no!) Where exactly is all this money going to come from? Something's gotta give, surely?
September 29, 2008
CAN WE ACT?
As a follow-up of sorts to my posts on how much the bailout is not likely to cost and how much more important health reform becomes as our economic outlook worsens, it's worth linking to this op-ed by former Treasury Secretary Larry Summers -- a decidedly centrist, broadly respected economist -- who writes:
Quote:The idea seems to have taken hold that the nation will have to scale back its aspirations in areas such as health care, energy, education and tax relief. This is more wrong than right. We have here the unusual case where economic analysis suggests that dismal conclusions are unwarranted and recent events suggest that in the near term, government should do more, not less.
First, note that there is a major difference between a $700 billion program to support the financial sector and $700 billion in new outlays. No one is contemplating that $700 billion will simply be given away. All of its proposed uses involve purchasing assets, buying equity in financial institutions or making loans that earn interest. Just as a family that goes on a $500,000 vacation is $500,000 poorer but a family that buys a $500,000 home is only poorer if it overpays, the impact of the $700 billion depends on how it is deployed and how the economy performs.[...]
[In] the current circumstances the case for fiscal stimulus -- policy actions that increase short-term deficits -- is stronger than ever before in my professional lifetime. Unemployment is almost certain to increase -- probably to the highest levels in a generation...The economic point here can be made straightforwardly: The more people who are unemployed, the more desirable it is that government takes steps to put them back to work by investing in infrastructure or energy or simply by providing tax cuts that allow families to avoid cutting back on their spending.
Fourth, it must be emphasized that nothing in the short-run case for fiscal stimulus vitiates the argument that action is necessary to ensure the United States is financially viable in the long run. We still must address issues of entitlements and fiscal sustainability...The best measures would be short-run investments that will pay back to the government over time or those that are packaged with longer-term actions to improve the budget, such as investments in health-care restructuring or steps to enable states and localities to accelerate, or at least not slow, their investments.
In other words: A recession creates a straightforward Keynesian case for increased investment. When natural economic demand slackens, the need for public investment to kickstart the economy increases. Meanwhile, short-term problems do not obviate long-term threats. The looming dangers posed by health costs, global warming, etc, will not pause to politely wait out our recession. Most everyone knows that. But there's no doubt that if Obama -- or McCain -- is elected, that House Republicans and others opposed to action on these issues will pretend that the bailout somehow extinguishes our ability to act, and reduces the urgency of the problems. They will be lying.
The 'right' Robert Gentel,comes from the fact that we are unique as a country.
We were established on the basis of Equality.
There is no reason why a CEO should make three hundred times more than one of his regular employees.
That is a slap in the face to the idea of Equality.
How can our counry prosper when there are so many poor people who will, because of our racist system, never get a high quality education?
If cutting down the 300-1 ratio, leaves us with enough money that our educational systems can benefit, it is an investment that will enable us to meet the goal of BASIC equality for all.
Recriminations, Recriminations, Recriminations
The Republicans are blaming Nancy Pelosi's "partisan" speech for the failure of the bailout bill. "The speaker had to give a partisan voice to it, and it caused a number of members we thought we could get to go south," said John Boehner at a press conference. "Right here is why I believe this bill failed," added GOP Rep. Eric Cantor, waving a copy of the text. "This is an instance where you see Pelosi's failure to listen, failure to lead ..."
This sounds like spin to divert blame from the GOP for the failure of the bill, but two Republican staffers I know were themselves surprised by the outcome -- they had expected more GOP votes, and minority whip Roy Blunt claimed their whip count showed at least 12 more votes going in, which would have saved the bill.
But if it's true ... give me a break! No matter what you thought of the details of the bill, is that not the most immature thing you've ever heard? To vote against the biggest bill of the year -- to let, as President Bush put it, the sucker go down -- because the Speaker insulted your feelings? [..]
Barney Frank is incredulous: "[..] Think about this: somebody hurt my feelings, so I will punish the country! I mean, that's hardly plausible! I'll make an offer: Give me those twelve people's names and I will talk uncharacteristically nicely to them and tell them what wonderful people they are, and maybe they now will think about the country," he said. Meanwhile, in her speech at the Democratic press conference, a defanged Nancy Pelosi uses the word "bipartisan" five times.
A Moneyman Reacts [Kathryn Jean Lopez]
An e-mail from a Western-state bank president:
[..] The failure of the House to pass the bill " combined with the resulting bickering " will likely lead to a substantial market sell-off. We’re seeing part of that occur right now, but we may well see much worse over the coming days as the inevitable sell-off hits overseas markets, followed up by another collapse at home as forced selling really kicks in and many institutional investors are required to liquidate their leveraged positions. While it would be nice if all this was confined to a few select Wall Street bad apples, the reality is ordinary people will be hurt very badly as their investments deteriorate and the economic environment turns even more negative. Unemployment will likely spike sharply from here, and the lack of available credit will impair many small businesses that rely on credit lines to finance their operations.
How any of this could possibly be construed as a positive for either McCain or the Republican Party is beyond me (and I say this as a life-long Republican)? In fact, it would seem much more likely to me that the House Republicans just handed the election to Obama on a silver platter. Blaming the vote on Pelosi’s antagonistic remarks seems especially dumb, and I expect to see Barney Frank-type comments all over the MSM tonight and throughout the week. [..]
Subject: Pelosi comments [Rich Lowry]
Rich " I’m afraid Rep. Frank has a point on this one. Some feelings on the GOP side were hurt, so they voted against the economic well-being of the country?
A very concerned GOP staffer.
So there you have it: more than two-thirds of House Republicans voted against a bill their own leaders had signed off on, sponsored by their own president, and endorsed by their presidential candidate as a matter of urgent national importance, and even of patriotism. Yet it's the fault of Barack Obama and Nancy Pelosi!
Do you take it (or part of it) away from me? Why would I continue to work hard if you can do that to me?
Why is Michael Jordan not worth his salary? Why should someone bust their balls to build the next big thing if you are going to arbitrarily limit their success?
With respect to legislatively curtailing CEO compensation packages, Robert Gentel said, "It's unconstitutional. That's how divisive. The right to private contracts was established before the bill of rights."
It is NOT unconstitutional. The constitution grants Congress the power of the purse and the power of taxation.