It's the Politicians, Not the Public

The United States was once a bastion of capitalism, but a comment I sometimes hear from recent immigrants is very telling. They ask,“Why are some Americans trying to turn this country toward socialism?”

The government now owns large stakes in major U.S. corporations. It created a task force to make strategic decisions for the automobile industry. It fired the CEO of General Motors (GM). After pouring billions of dollars into that company, it finally admits that bankruptcy might be an option. A capitalistic economy would have recognized this long ago. With Americans buying only nine million cars per year, the industry has too much capacity. The least efficient companies and plants must be shut down. While I hate to see anyone lose their job, I have to wonder if it wouldn’t have been cheaper to pay laid off GM autoworkers to retool their skills for a new job than to keep pouring money into a failing business.

Then there is the uproar over the AIG bonuses. Excessive executive compensation has been a point of contention for years—and rightly so. As I mention in my book, Even Buffett Isn't Perfect, in the 1970s the typical CEO made about 25 times what the average worker at his company made. By 2000 this multiple reached almost 400. My long held personal opinion is that anyone who makes more money than I do is grossly overpaid. Yet, if you have noticed, I haven’t quit my job. That should tell you that I must be at least somewhat satisfied with what I’m making.

It is not surprising that the average Joe gets all worked up when he hears about multimillion dollar bonuses in the executive suite. No doubt he works hard too, but no one has ever offered to pay him anything close to that kind of money. So the outrage over the AIG bonuses is perfectly understandable. The real shame, however, is the behavior exhibited by some of our politicians. After forcing out the former CEO, the government asked Ed Liddy to come out of retirement to save the company. He did not seek the job. The government even passed legislation authorizing the payment of those controversial bonuses. Then when elected officials realized their constituents were upset, they gave Liddy a public tongue lashing. The man who is getting paid just $1 per year to do the government’s bidding sat there and looked contrite with hardly a word of objection. He should have pulled a Johnny Paycheck. He should have stood up and said, "Take this job and shove it! I ain’t workin’ here no more."

Of course, if taxpayers had not bailed out AIG, the company would no longer exist and bonuses would not have been paid. However, the government chose to bail it out, and as one AIG employee who recently published his letter of resignation in the New York Times pointed out, employees were promised on several occasions that they would receive the bonuses if they stayed. Some gave up opportunities elsewhere because of thosepromises. Now with a gun pointed at their head, they are "voluntarily" returning the bonuses. With a multitrillion dollar budget deficit and trillions more in debt, taxpayers can at least take solace in the fact that politicians did everything possible to get back those bonuses.

Comments

[MarvinMBA:]

The old economic models will not work any longer and I suppose bailing out with bucks you do not have can be dangerous and highly inflationary. The USA cannot let some entities fail because that would be the demise of our economic system faster than you can shout socialism. It does seem as the bailout will transform the country to socialism and working for the government might be the best job you can have. Those outside the government will be bled until they are drained out of every drop of blood. We are going into a command capital system with the government in command. Try to get into some or any government entity or government sponsored entity for safety and stability and all of the feebees there are. If you are not smart enough to do this you will pay for others that are...MarvinMBA

Apr 03 02:10 AM

[MarvinMBA:]

When this is all over we can consider ourselves a failed social state!
Why not...we will have plenty of company..

Apr 03 02:17 AM

[Hillsfar:]

This site needs a delete feature. I accidentally left the above comment on a separate article:
seekingalpha.com/artic...

Apr 03 03:09 AM

[Fastfred:]

AIG promised contractual bonuses to it employees. Just like GM and Chrysler promised health care to it retirees in their contract. However, when the corporate ship is sinking, those contractual agreements seem to be worthless. There appears to be two standards with our government. A golden standard for banks and investment companies contracts and a porcelain toilet standard for blue collar UAW contracts. AIG executives may now have a gun pointed at their head, but the UAW retirees and workers have an atomic warhead aimed at their heads. AIG executives need to stop whining and be grateful they are not getting the same treatment. Also, some of the GM plants slated for closure are some of the most efficient in North America according to the 2008 Harbour report. Chrysler has reduced it's workforce by 40% since 2001, and they overtook Toyota as the most efficient automotive plants in North America. The government's indecisive actions to save GM and Chrysler has put them in greater peril.

Apr 03 04:39 AM

[Moon Kil Woong:]

It is simple, government funded/controlled companies don't work. The capitalist drivers fail for them. If your company wants public funding look for a new job because that means your executives have made your current company a zombie.

In the meantime, be glad you have a job because the company you are working for now should be dead or in bankruptcy court already. This isn't much solace for million dollar bankers though. The economic model for ridiculous pay is evaporating, which is probably an indication this downturn will eventually end.

Apr 03 05:13 AM

[Candor7:]

A golden standard for banks and investment companies contracts and a porcelain toilet standard for blue collar UAW contracts.>>>...

You have identified a very genuine interface between the new
born again Dem ( Nationalist Socialist) Party and its traditional institutions. Is there money to be made? You bet, but best from a very legal off shore account position.
America is now in the throws of a kinder gentler liberal fascism, just as predicted by author Jonah Goldberg. We have the ballot box chance in 2010 to send them packing. None too soon either.

This wake up came home to all with the pre-emptive strike against GM and Chrysler by zero.A fond wish is that they both be purchased by the PRC, the worlds new leader of capitalism.

No one can sit easy with the new definintion of " the investment class" by zero, nor his now clear plan to destroy it. Smart money is legally off shore, to stay for the duration.Even the oil corporations know this and have quietly moved head offices elsewhere. Individuals follow the lead.

We would actually have a solid recovery popssibility if this "social war" had not been launched, feathered by a continuing zero campaign for the continued enthrallment of the US electorate, doomed to eventual failure. Thats when things will get ugly.
God bless America! Its government won't!

Ask yourself how the federal government can shut down the markets by executive order.



On Apr 03 04:39 AM Fastfred wrote:

> AIG promised contractual bonuses to it employees. Just like GM and
> Chrysler promised health care to it retirees in their contract. However,
> when the corporate ship is sinking, those contractual agreements
> seem to be worthless. There appears to be two standards with our
> government. A golden standard for banks and investment companies
> contracts and a porcelain toilet standard for blue collar UAW contracts.
> AIG executives may now have a gun pointed at their head, but the
> UAW retirees and workers have an atomic warhead aimed at their heads.
> AIG executives need to stop whining and be grateful they are not
> getting the same treatment. Also, some of the GM plants slated for
> closure are some of the most efficient in North America according
> to the 2008 Harbour report. Chrysler has reduced it's workforce by
> 40% since 2001, and they overtook Toyota as the most efficient automotive
> plants in North America. The government's indecisive actions to save
> GM and Chrysler has put them in greater peril.

Apr 03 07:31 AM

[cocomurph:]

...and who elected ( and continues to mostly re-elect ) these politicians?

Apr 03 08:26 AM

[SW Richmond:]

On Apr 03 08:26 AM cocomurph wrote:

> ...and who elected ( and continues to mostly re-elect ) these politicians?

A public that has been bombarded (successfully) with the false left-right political dichotomy. More and more are realizing that both parties work for the same masters; the crisis has forced the masters to reveal themselves.

Apr 03 09:14 AM

[Ferdinand E...:]

Recent immigrants believe the US is moving toward socialism because they are completely and totally ignorant of US history and culture. The US has no socialistic philosophy and no political party with a socialistic program, and so any any ownership the government has in large corporations can be rescinded in due course.

Apr 03 09:36 AM

[Paul Killinger:]

Boy, are you right. And there's no way to fix it short of imposing term limits on Congress. And that's not about to happen, since they'd have to vote to impose them on hemselves. Gingrich and his buddies missed the only realistic opportunity to do this that we ever had.

Apr 03 10:10 AM

[fireball:]

hi paul

is there a possibility that those in power want to worsen the problem to gain more control. use the crises whether real, allowed or created. squeeze until the confused majorities bleat for the problem causers to take control and solve the problem. there are the unruly types the ones who believe in the free society and seek to restore constitutional restraints on government run amok. those that have played by the rules and won't surrender their God given rights to the nanny state. they will be a thorn in the side of the statists.

Apr 03 01:06 PM

[henarl:]

The current "war on deflation" kind of reminds me of "the war on poverty", "the war on drugs", and "the war on terrorism". These are all just government constructs to excuse a further power grab over the general population. They never really expect to win any of these "wars" but, hopefully, to continue profiting from them forever.

Apr 03 01:40 PM

[PainfullyAware:]

Electronic Voting Is Culpable Along With Censored Propaganda.

Very few question validity or source of information.



On Apr 03 08:26 AM cocomurph wrote:

> ...and who elected ( and continues to mostly re-elect ) these politicians?

Apr 03 03:11 PM

[hksche2000:]

AIG employees, choose one of the following two options:
(1) No AIG, no jobs.
(2) Bailed out AIG, no bonuses.
Which is it?
Go ahead, make our (taxpayers') day!

Apr 03 04:49 PM

[Al-USA:]

Good article, except it is not the politicians so much as the masters behind pulling the power levers: the American Oligarchy.

More information below:
Banks Counted on Looting America’s Coffers
tinyurl.com/bkezmt

The Quiet (American) Coup
tinyurl.com/dmspxm

Welcome to America, the World's Scariest Emerging Market
tinyurl.com/c8dpk8

Obama’s Ersatz(pseudo) Capitalism
tinyurl.com/csek3k

America the Tarnished
tinyurl.com/dy4gvt

Geithner plan will rob American taxpayers: Stiglitz
tinyurl.com/d564xq

Timothy Geithner's toxic plan
tinyurl.com/d8xsb5


"Fluke? Credit crisis was a heist"
tinyurl.com/cgugqm

"Following the A.I.G. Money"
tinyurl.com/d6xkbk

"Economic Fascism and the Bailout Economy"
mises.org/story/3333

"Behind the Financial Market Crisis?"
mises.org/story/3111

Hedge funds are the real AIG outrage
www.guardian.co.uk/com...

The Obama Deception Full Length
tinyurl.com/d4bnbk

Apr 04 11:35 PM