Truth be told, it's actually been kind of a "talking points week" for me this week. On Monday, I wrote about how the Democrats need to frame the stimulus debate better if they wanted to convince the public of the righteousness of their cause. Tuesday, I took a break to express my support for the idea of nominating Howard Dean as Health and Human Services Secretary, after Tom Daschle crashed and burned. Wednesday, though, I was back at it again advising Democrats to start demanding an up-or-down vote in the Senate, and yesterday I asked the eternal question: "Why must Democrats always act like such... well... Democrats?"
In other words, it's been a week of focusing on the stimulus package and how Democrats should be framing the issues. Now, President Obama seems to be finally hitting his stride on the issue, as he showed some genuine frustration yesterday. This is good, because he's going on prime time television Monday and he needs to be in peak form when he does.
But alongside the stimulus debate, there is another issue which needs addressing -- one which I have been avoiding talking about until now. I speak of executive compensation. The reason I have been avoiding it is that (1) the stimulus is a more pressing and immediate concern because it will be passed first, and (2) because every time I sit down to write about it I get so enraged I can barely type. So I've held off. Until now.
So instead of the usual Friday Talking Points this week, I am going on a rant. Because while pundits have begun casually tossing around the term "populist" and even "populist rage," they ain't seen nothin' yet.
You have been warned.
But first, we have the awards to hand out. Three Democrats stood out this week for trying to tackle the question of executive compensation. However, all of their approaches are flawed in one way or another. From most flawed to least flawed, here are the three plans:
President Obama made a lot of headlines for his call for a "salary cap" on executives taking bailout money from the federal government. However, the loopholes in his plan are so gigantic you could fly a corporate jet through them. Heck, you could do barrel rolls in a corporate jet through them. Obama's never really been a populist, and up until now he was trying to get away with vague language which "reined in excessive executive compensation" -- without attaching a dollar amount (which leaves so much wiggle room as to be meaningless). So he made news when he proposed capping pay at $500,000. Kind of.
Because if you parse his statement, the loopholes become evident. Here is the president:
As part of the reforms we are announcing today, top executives at firms receiving extraordinary help from U.S. taxpayers will have their compensation capped at $500,000 -- a fraction of the salaries that have been reported recently. And if these executives receive any additional compensation, it will come in the form of stock that can't be paid up until taxpayers are paid back for their assistance.
First, he's only talking about banks taking TARP money (Wall Street bailout funds). Whoops! Except he's not even talking about all of them. Just the ones who take "extraordinary help" from the TARP funds, whatever that means. And it's just "top executives" meaning high-paid non-executives (traders, for instance) may not be subject to the cap. And Obama misspoke when he said "have their compensation capped," because he's really only talking about a salary cap, not a compensation cap. The CEOs can still get paid millions upon millions, but they'll have to wait a little while before they're allowed to spend it, in other words (after they pay a reduced tax rate on the money, of course).
So, what Obama is proposing is not capping executive pay, or capping executive pay on Wall Street, or even capping executive pay on Wall Street banks getting taxpayer money. What he is proposing is capping the salary only of Wall Street top executives only from banks that receive extraordinary help from taxpayer money. Everyone else is free to keep wallowing in troughs filled with millions of taxpayer dollars.
Which is why Obama does not win Most Impressive Democrat Of The Week.
Slightly better is the plan proposed by Senator Claire McCaskill last Friday, which would cap all compensation for all employees of any bank getting taxpayer money at the current level of the president's salary -- $400,000. This immediately closes three of the gaping loopholes in Obama's proposal. But even McCaskill walked this back a bit after Obama announced his plan. Here she is talking to Chris Matthews on Tuesday: "And if you [executives] want to make more, if you want to have deferred compensation, that's fine, but you can't get it until you pay us back." Meaning Obama has probably had a phone conversation or two with the good senator from Missouri.
But McCaskill, though bold, does not win the MIDOTW award either.
Because this week, the Most Impressive Democrat Of The Week is Representative Barbara Lee, who is about to propose changing the tax structure for all employee compensation for all American businesses. Her bill has a flaw in it as well, but is still the most impressive suggestion yet. Because she would not "cap" any executive's pay at all. Your company wants to pay your CEO $10 million per year? Fine. $80 million per year? Whatever. The law would still allow companies to do so.
But everything over a certain amount would not be tax deductible for the company. Meaning it would be counted as "profits" for the company, and taxed accordingly. And, for publicly-held corporations, the money would come straight out of the shareholders' pockets. Now THAT is more like it! One change to the tax code, and the shareholders would rein their own companies' executive pay in, without making having to make it "illegal" or anything.
The flaw in her plan is that she uses a rolling scale to figure what the upper limit is -- 25 times the least-paid employee of the company. But rather than multiplying the minimum-wage janitor's pay to figure the cap, most companies would see this as the loophole it is, and immediately "fire" any employee making too little, and then immediately "hire" them back again as "independent contractors." This would also save the company from having to offer these low-paid workers any meager benefits whatsoever, so it's hard to see why companies would not immediately "fix" the problem in this fashion.
What is truly needed is a combination of Lee's idea and the hard-and-fast limits from either McCaskill or Obama -- $400,000 or $500,000. Draw a line in the sand. Anything paid over that line -- whether "salary" or "bonus" or "commission" or "perk" or "stock" or "stock options" -- anything over that amount would not be tax deductible for any company. Period.
But because Lee got closest to actual populism, and because her loophole is one of the easier ones to fix, Representative Barbara Lee gets this week's Most Impressive Democrat Of The Week award. Well done, Congresswoman Lee!
[Congratulate Representative Barbara Lee on her House contact page to let her know you appreciate her efforts.]
With friends like these...
Senator Claire McCaskill introduced her compensation cap bill to the Senate a week ago. It is bill S.360, and it is short, sweet, and to the point. I especially like the end of it, where she seals all loopholes imaginable:
As used in this Act, the term "compensation" includes wages, salary, deferred compensation, retirement contributions, options, bonuses, property, and any other form of compensation or bonus that the Secretary of the Treasury determines is appropriate.
But the shameful thing is that after a full week, there are still no cosponsors of this bill. None. Not a single Democrat has supported her efforts.
Now, Claire McCaskill is not the most liberal member of the Senate. So where is the outpouring of support for her bold stand? Where is Bernie Sanders? Where is Russ Feingold? Where is Teddy Kennedy's office (he is still having medical problems, but his office could have taken care of this for him)? Where is Sherrod Brown? Where is Barbara Boxer? Where is John Kerry? Where are the rest of the liberals in the Senate? What the heck are they waiting for?
Aside: Can we seat Al Franken now, please?
For this dismal show of non-support, for this absence in the face of courage, for this utter failure to stand up to Wall Street executives, every single Democratic Senator other than Claire McCaskill is hereby awarded the Most Disappointing Democrat Of The Week award.
[Contact your own Democratic senator from the Senate contact page to let him or her know what you think of his or her inaction.]
Volume 64 (2/6/09)
F. Scott Fitzgerald, in "The Rich Boy," wrote: "Let me tell you about the very rich. They are different from you and me." To which Ernest Hemingway may (or may not) have answered back: "yes, they have more money."
Sorry, I just had to get that out of my system. Before I truly unload with an epic rant.
Let's review where we are, how we got here, and what exactly we're talking about when the subject of "executive compensation" or even "Wall Street" arises. You will not hear any of this spoken in plain language on television news, because both the interviewers and the interviewees are so impossibly out of touch with the American people that they don't even know enough to be outraged. Or to understand the outrage which is growing daily in this country. All you will get on television are apologists (to some degree or another) for the status quo. If you like that sort of thing, turn off your computer now, go sit in front of the idiot box, and soak up the hypocrisy.
For those of you still reading, let's first put things in perspective. 20,000 jobs a day are being lost in America right now. Twenty thousand jobs. Each and every day. Gone. The American worker is not scared when thinking about their job security, they are terrified right now. As we examine the issue before us, please just keep this fact in the back of your mind. Today, there are 20,000 fewer jobs than yesterday. Tomorrow, another 20,000 will disappear.
Now, what Wall Street did exactly is very, very complicated. They replaced the bedrock of the American economy with sand. Quicksand, in actual fact. But how they did it is complicated. So I'd like everyone to take a minute and review how we got here, explained (better than any other explanation I've seen yet) in cartoon form by Tom The Dancing Bug's "Lucky Ducky."
OK, got it? Wall Street took down the entire planet's financial system by trading toxic waste as if it were as valuable as gold. That is how we got to where we are now. This was helped along by politicians (of both stripes) worshiping "de-regulation" since Ronald Reagan's time. The theory went: "if we let Wall Street regulate itself, they'll do a fine job and won't just try to heap up their own piles of money while destroying the economy." This actually seemed to work for a while. That's why they call them "bubbles," since everything seems dandy until the bubble pops.
Now, the bubble has popped. And these corporations are "too big to fail," meaning they have Congress over a barrel. Since last fall, we have been shoveling money at them as fast as we can print it, in the hopes of saving the American economy from total and utter collapse. Because of what these executives did to the economy while nobody was looking.
Got all that?
Oh, right, you can't forget the icing on the cake. Companies that would have gone bankrupt except for the massive infusion of hundreds of billions of taxpayer dollars then turned around and gave away as "bonuses" almost twenty billion dollars, which again, came directly or indirectly from the taxpayers. And they don't see anything wrong with that.
So far, except for the cartoon, we have been within the reality-based community. Actually, the cartoon was a heck of a lot more reality-based than the talking idiots on television, now that I think about it. But here is where we truly enter the realm of Republican Wonderland, because here is where we start talking about the salaries of the people who fiddled while Rome was burning. And here is the point where I look around me to see what sorts of objects I can hurl in frustration towards the television, when I hear absolute nonsense from (as Glenn Greenwald likes to call them) "Serious People In Washington."
The first telegram from Wonderland goes something like this:
"If we don't pay these Masters Of The Universe obscene amounts of money, then they will leave the company and they are the only ones who can get us out of this mess." In other words, if you cut CEO pay, the CEOs might leave the company they bankrupted.
And this is a bad thing... how?
So, let's see, you've got on your résumé "I helped destroy Western financial civilization" and you're looking for a job that pays you far more than a piddly $500,000 a year to push paper around a desk -- and of course there will be hundreds of job offers for you to choose from, because the economy is doing so well...
You can see why I call it Wonderland. Because what company in their right mind would hire these idiots, who have proven beyond a shadow of a doubt that they truly do not know what they are doing? At any price? So we can't possibly cut their pay (the argument goes) because (gasp!) they might actually quit and stop... oh, I don't know... destroying the company and the entire economy?!?
I'm having a real hard time seeing the downside to that, not being a Wall Street executive (I concede that they might see it differently).
Because if these geniuses quit, there isn't anyone in the entire country that could do what they are supposed to do better? There aren't hundreds and hundreds of solid bankers who could run the company without running it into the ground? Personally, I bet you could hire pretty much at random any banker in the Midwest, or even any freshly-graduated economics student to do a much better job than these jokers.
And I bet you could hire them for a lot less than even $500,000, to boot.
The second missive from Wonderland comes from the apologists for the stinking piles of money these people are used to making. You'd think nobody would be stupid enough to attempt to justify such greed in these dire times, but you would be wrong.
First, there was the stunning elitism of Rudy Giuliani, which is so easy to tear down that I'm not even going to bother. His basic theme was "every job in New York City would disappear tomorrow if Wall Street executives are denied their multimillion-dollar salaries and bonuses." You think I'm kidding, but you just can't make this stuff up.
Then there were a bunch of pinheads on television comparing the Wall Street bonuses to "tips a waitress makes" or "commission, like a car salesman gets." Excuse me? OK, any Wall Street executive (and any snivelling apologist on television) who thinks their existence equates to a waitress or a car salesman needs to swap paychecks and lifestyles for just one week with a Denny's waitress, and then come back and tell me that with a straight face.
The elitism is just so blatantly stunning that I'm astonished nobody calls them on it. Which, as I said previously, is why I get so enraged I can barely type.
But even better was this nugget from the New York Times recently:
"That is pretty draconian -- $500,000 is not a lot of money, particularly if there is no bonus," said James F. Reda, founder and managing director of James F. Reda & Associates, a compensation consulting firm. "And you know these companies that are in trouble are not going to pay much of an annual dividend."
Mr. Reda said only a handful of big companies pay chief executives and other senior executives $500,000 or less in total compensation. He said such limits will make it hard for the companies to recruit and keep executives, most of whom could earn more money at other firms.
"It would be really tough to get people to staff" companies that are forced to impose these limits, he said. "I don't think this will work."
Just for the record, Draco (where we get the word "draconian" from) would have either sold these guys into slavery, or put them to death. That is "draconian." A "mere" half-million per year in salary is so far from "draconian" that I'm amazed Reda's pants didn't immediately catch fire when he uttered such nonsense.
Cry me a freakin' river, in other words.
We interrupt this rant for a reminder -- 20,000 jobs a day are still being lost in America. Twenty thousand more people now have no paycheck at all. Many of these jobs have been lost in the banking sector. You think some of them wouldn't jump at the chance to work again at a fraction of this "draconian" limit?
And the third message from Cloud-Cuckooland, via Wonderland delivery service, is an ideological one from Republicans. Here are a few quotes, from an article in the Huffington Post today:
"What executives have done is troubling, but it's equally troubling to have government telling shareholders how much they can pay the executives."
--Senator Mel Martinez
"Because of their excesses, very bad things begin to happen, like the United States government telling a company what it can pay its employees. That's not a good thing in America."
--Senate Minority Whip John Kyl
"It's a leap, because the executive at the bank is a free agent who can leave the bank and go to work someplace else. You run the risk of having a brain drain at the bank of their top talent. Some of the things some of these bank executives have been doing demonstrates they have a tin ear. At the same time, I'm generally troubled by wage and price control, no matter how logical it may appear."
--Senator Bob Bennett
"If Congress can run a financial institution, it belies everything I've seen in this body. Government does not do a good job running private institutions."
--Senator Kit Bond
Sounds like a nice, principled stand, doesn't it? Government can't possibly get involved in dictating what businesses pay their employees -- even when they're getting government money to do so.
This is such absolutely laughable hypocrisy from these guys, though. Now, most of the American public (and all of the media) seem to have the attention span of a houseplant, but some of us have memories which stretch all the way back to a few months ago. Remember when the American automakers came to Congress to ask for a paltry $25 billion bailout? To put this in perspective, this is probably less than one-fortieth of the trillion-dollar-plus bailout we have given (and are going to give) to Wall Street.
Yet that $25 billion of taxpayer money was so precious to the Republicans that they literally wanted to rewrite the autoworkers' union contracts on the floor of the House and Senate. Remember all the Republican outrage at union workers making $45 an hour (inflated by the Republicans to the false figure of $73 an hour)?
Reality-check: the average CEO is paid around $10 million per year, which works out to $5,000 an hour. And even the "draconian" $500,000 salary works out to $240 an hour. So which is a bigger problem? Which do you think Republicans were salivating over -- cutting the $45 an hour salary of a guy who builds cars, or the $5,000 an hour salary of a guy who destroys our economy?
This context is extremely important, because it completely undercuts the "government shouldn't dictate anybody's salary" horse manure coming from the GOP. The only response to such tripe is "well, let's see what you had to say about UAW pay two months ago, Senator..." And yet, as far as I've seen yet, nobody has even bothered to make this argument.
Which is really what inspired this rant.
If Democrats can't take a strong stand on this, they all need immediate replacement by someone who can. Rasmussen reports that cutting executive bonuses for banks that take taxpayer dollars is polling at 88% right now. That's a stunning figure, because you usually can't get 88% of people in a public poll to agree the sky is blue. In other words, you simply cannot lose in the arena of public opinion with this issue. That's rare, politically. Incredibly rare. So why aren't the Democrats jumping on this issue?!? Republicans have even made it easy for them to do so, by taking the side against the 88%!
Some might make the argument that executive pay should be handled as a separate issue, or that it should only apply to the bailout banks, or whatever. These are various flavors of the tired old Washington refrain of: "well, it's a good idea, but maybe later..." in which "later" never comes. Robert Reich, Clinton's Secretary of Labor, wrote an excellent piece which lays out in detail why we have to fix such underpinnings of our economic system in order for the economy ever to fully recover and become competitive again. Reich's piece is as sober as this rant is emotional, and I highly recommend it to all.
Wall Street, and their Republican enablers, have taken the position of "Let them eat cake." It is so indefensible to the average American as to defy explanation. The news anchors need to get out of their own bubble, and go and talk to some of those 88% of Americans. They would find economic fear stalking the countryside, laying waste to thousands of jobs which may never return. And they would find people getting angry that the only thing politicians can do about it is to argue whether "only" $500,000 a year -- of their taxpayer dollars -- is a "draconian" pay cut for the people who caused this mess.
Because what historically follows such elitism is often enraged mobs armed with pitchforks and torches. And if the media continues to ignore the anger and rage brewing in the countryside, they'll be cheerfully telling us that "hard goods sales in hardware stores such as pitchforks took an upswing this month, so maybe the economy's recovering" -- right before the Bastille is stormed.
[I apologize for monopolizing the column with a rant this week. We will return to our normal format next week.]
Chris Weigant blogs at: ChrisWeigant.com
Full archives of FTP columns: FridayTalkingPoints.com
Cross-posted at: Democratic Underground