Thursday, April 2, 2009
Republicans voting with Obama
Roughly half of House Republicans voted in favor of the punitive 90 percent tax on AIG bonuses. Many of them must have heard from their constituents because the number voting in favor of today's "Pay for Performance Act" totaled only 10. Michelle Malkin lists the 10 on her website but of particular importance to this old fool was the vote of Congressman Dana Rohrabacher, who represents parts of Orange County, California. Usually, Rohrabacher is a safe conservative vote. He has not explained either his vote in favor of the AIG 90-percent-of-bonus tax or today's vote, but needs to.
Sunday, March 29, 2009
Michelle Obama
According to Lexington, columnist at The Economist, Mrs. Obama ought to give some serious speeches on policy instead of working on or displaying her "perfectly toned" arms.
Lexington mentions the collapse of black families and the 60 percent out-of-wedlock birth rate among blacks, apparently suggesting these as issues Mrs. Obama could speak about. Lexington suggests that the causes of these are job losses, drugs, crime and family breakup.
All these are self-inflicted except one: job losses, and that may be self-inflicted too in some or most cases. (If you don't show up for work then you'll likely lose your job.)
If Mrs. Obama has solutions for the out-of-wedlock birth rate or the collapse of black families and chooses to speak about them, chances are her words will be well received. If she speaks instead on subjects or issues about which she has little or no knowledge -- like the economy or foreign policy -- then her words probably will fall on deaf ears.
Lexington mentions the collapse of black families and the 60 percent out-of-wedlock birth rate among blacks, apparently suggesting these as issues Mrs. Obama could speak about. Lexington suggests that the causes of these are job losses, drugs, crime and family breakup.
All these are self-inflicted except one: job losses, and that may be self-inflicted too in some or most cases. (If you don't show up for work then you'll likely lose your job.)
If Mrs. Obama has solutions for the out-of-wedlock birth rate or the collapse of black families and chooses to speak about them, chances are her words will be well received. If she speaks instead on subjects or issues about which she has little or no knowledge -- like the economy or foreign policy -- then her words probably will fall on deaf ears.
Friday, March 27, 2009
Government versus non-government workers
Hardly any federal, state, county, city or school employee ever loses his or her job. They're civil service. Their jobs are guaranteed, if not formally then practically. Meanwhile, non-government employees lose their jobs all over.
That used to be a grand bargain. Government workers were paid less but their jobs were secure and they got good fringe benefits. Non-government ones made more but their jobs were at risk and their fringes were not as good.
No more. Government workers now are unionized. Their pay is as good as or better than non-government workers. Government workers' jobs still are secure and their fringes are outstanding.
Where's the bargain?
That used to be a grand bargain. Government workers were paid less but their jobs were secure and they got good fringe benefits. Non-government ones made more but their jobs were at risk and their fringes were not as good.
No more. Government workers now are unionized. Their pay is as good as or better than non-government workers. Government workers' jobs still are secure and their fringes are outstanding.
Where's the bargain?
Tuesday, March 24, 2009
More thoughts on bonuses
Congressional behavior last Friday was not merely an exercise in poor judgment, it was vindictive, malicious and petty, all of which proved one thing: those who voted for the 90 percent tax on bonuses aren't nice people. You couldn't afford to consider any of these congressmen or women personal friends, even if you knew them well. They couldn't be trusted to do the right thing most of the time. (None of us does the right thing all the time.) You'd have to watch your back. Yet these people help to govern the United States of America. It's a wonder our nation has lasted this long.
Thank God our founders set up two houses of Congress, neither of which can act alone. Thank God there is an executive branch and a judicial branch, all of which are, in theory at least, independent. If not for this division of authority and responsibility, our nation would have been toast long ago.
Thank God our founders set up two houses of Congress, neither of which can act alone. Thank God there is an executive branch and a judicial branch, all of which are, in theory at least, independent. If not for this division of authority and responsibility, our nation would have been toast long ago.
Monday, March 23, 2009
Poor judgment
The action Congress took last Friday to tax AIG's and other bonuses at 90 percent is wrong on so many fronts that it's hard to decide what argument against them to bring up next. Here's one that hasn't been been discussed in newspapers and blogs so far.
It's poor judgment to select someone to take charge of an organization and then nitpick or second guess his or her decisions. Instead, the selected person should be judged on results -- did sales increase, is the company more profitable, is there less employee turnover, have contributions increased, are patients happier, are fewer lawsuits filed against the entity, etc. -- depending on what the selected person was hired to do.
In the case of AIG, Edward Liddy was hired to shut it down, with minimum loss to the government and minimum disruption of the financial system. He hasn't yet done that but we knew it would take a while. AIG is large and has tentacles all over, so its liquidation will take time. While Liddy is engaged in doing what he was hired to do, he must be given the authority to make decisions. What he decides must be final, otherwise all the people he deals with will know he's powerless. A powerless CEO is worse than no CEO.
It's counter-productive to countermand a CEO's decisions. If Liddy approves of bonuses, those bonuses must stand. Liddy weighed the arguments for and against paying the bonuses before he approved them. (AIG was legally obligated. AIG needs the people who got the bonuses to help with the liquidation. The bonuses are a lot of money but the cost of not paying them would be more.)
Obviously, if Libby's overseer loses confidence in him, Liddy has to go. Apparently that hasn't happened. If it does, the debate should be over whether to keep Liddy or fire him, not whether this or that Liddy decision should be reversed.
In Congress, irrationality trumps thought and common sense. It shouldn't but it does. Capricious, ever-changing, ex post facto rule-making makes people nervous and destroys their confidence in government, besides which it's unjust.
It's poor judgment to select someone to take charge of an organization and then nitpick or second guess his or her decisions. Instead, the selected person should be judged on results -- did sales increase, is the company more profitable, is there less employee turnover, have contributions increased, are patients happier, are fewer lawsuits filed against the entity, etc. -- depending on what the selected person was hired to do.
In the case of AIG, Edward Liddy was hired to shut it down, with minimum loss to the government and minimum disruption of the financial system. He hasn't yet done that but we knew it would take a while. AIG is large and has tentacles all over, so its liquidation will take time. While Liddy is engaged in doing what he was hired to do, he must be given the authority to make decisions. What he decides must be final, otherwise all the people he deals with will know he's powerless. A powerless CEO is worse than no CEO.
It's counter-productive to countermand a CEO's decisions. If Liddy approves of bonuses, those bonuses must stand. Liddy weighed the arguments for and against paying the bonuses before he approved them. (AIG was legally obligated. AIG needs the people who got the bonuses to help with the liquidation. The bonuses are a lot of money but the cost of not paying them would be more.)
Obviously, if Libby's overseer loses confidence in him, Liddy has to go. Apparently that hasn't happened. If it does, the debate should be over whether to keep Liddy or fire him, not whether this or that Liddy decision should be reversed.
In Congress, irrationality trumps thought and common sense. It shouldn't but it does. Capricious, ever-changing, ex post facto rule-making makes people nervous and destroys their confidence in government, besides which it's unjust.
Friday, March 20, 2009
Irrational rage
Members of the House of Representatives engaged yesterday in irrational rage when they voted a 90 percent tax on some people who have received bonuses, especially highly paid people who work at AIG, Fannie Mae and Freddie Mac. It's irrational because it does more harm than good. The head of Fannie Mae came out this morning and said as much. AIG CEO Ed Liddy told congressmen and women that when he testified on Wednesday. At the least, Congress should wait until AIG has been liquidated and Fannie Mae and Freddie Mac are on sound footing before trying to satisfy its rage.
Further, behavior of the kind Congress is engaged in affects markets. The behavior is interpreted as anti-business and it scares investors. A natural response to such behavior is for investors to become more risk averse. They will seek minimal-risk investments like U.S. Treasury Bills. They will not borrow and they will tighten the belt. Speculators will become short-sellers.
Is that what Congress wants? Whether it wants that or not, that's what it's going to get. The result will be fewer new jobs, more unemployment, higher federal outlays for unemployment benefits, smaller tax revenues and bigger deficits, all to penalize a very few people who make more money than Congress thinks they should.
Further, behavior of the kind Congress is engaged in affects markets. The behavior is interpreted as anti-business and it scares investors. A natural response to such behavior is for investors to become more risk averse. They will seek minimal-risk investments like U.S. Treasury Bills. They will not borrow and they will tighten the belt. Speculators will become short-sellers.
Is that what Congress wants? Whether it wants that or not, that's what it's going to get. The result will be fewer new jobs, more unemployment, higher federal outlays for unemployment benefits, smaller tax revenues and bigger deficits, all to penalize a very few people who make more money than Congress thinks they should.
Thursday, March 19, 2009
Why governments shouldn't nationalize
If the AIG fiasco teaches us anything it should teach us why governments shouldn't try to own or manage businesses.
As should be obvious by now, a bureaucrat is different from a business person. Their training is different and their motivations are different. They have different objectives and they have different points of view, which is why a bureaucrat shouldn't be assigned the job of managing a business.
By now, it also should be obvious that government ownership inevitably becomes political. The hearings yesterday in which congressmen and women beat up on AIG's CEO demonstrated the idiocy of combining politics and business.
Still not convinced. Read up on Britain's experience of nationalizing businesses starting in the 1940s, Britain's near bankruptcy in the 1970s and Margaret Thatcher's denationalization in the 1980s. The latter resurrected Britain's economy.
As should be obvious by now, a bureaucrat is different from a business person. Their training is different and their motivations are different. They have different objectives and they have different points of view, which is why a bureaucrat shouldn't be assigned the job of managing a business.
By now, it also should be obvious that government ownership inevitably becomes political. The hearings yesterday in which congressmen and women beat up on AIG's CEO demonstrated the idiocy of combining politics and business.
Still not convinced. Read up on Britain's experience of nationalizing businesses starting in the 1940s, Britain's near bankruptcy in the 1970s and Margaret Thatcher's denationalization in the 1980s. The latter resurrected Britain's economy.
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