How to Control Executive Compensation

To return to a previous sore point:

I'm sorry to say that I think Mr Obama's "Pay Czar" is making a hash of a response to the controversy over executive compensation. He has come up with a complicated scheme that will reduce pay for a few overpaid and probably undeserving executives (after all, they were the ones who caused the whole economic meltdown, they and their ilk). The scheme will end up in court, and after a long and costly series of trials and appeals, it'll be voided by the Supremes. It will cost us all a lot of wasted time and money, and accomplish nothing.

The problem -- the real problem -- is not that a couple of hundred honchos in bailed-out companies have exorbitant pay packages. The real problem is that large-company executives in general have exorbitant pay packages, while the rank and file people are stagnating economically, causing the gap between the rich and the rest of us to grow wider and wider, which in turn undermines the working and middle classes, who are the guarantors of the success of our democratic system of government.

The stress point in the popular media appears to be that our constitutional system of limited government prevents the government from regulating executive compensation.

Oh, pooh. Congress is perfectly capable of regulating executive compensation, and of doing it in a way that's in keeping with our present concept of "limited" government.  And it can do it in a way that is manifestly fair, in that it treats everyone the same, regardless of how much bail-out money their companies get.

Executive compensation is deductible as a business expense; there are some minor and essentially meaningless limitations on that, but basically every dollar the company pays out to every employee, executive or otherwise, is a dollar it doesn't get taxed on.

So all the Congress has to do is limit the tax deduction for compensation. I'm pretty sure Congress doesn't want to discourage companies from paying all those millions of middle- and upper-middle-class managers and union workers who are the foundation of their constituencies; nor would I. But it's a simple matter to take a self-adjusting figure, like the poverty line or the national median income or the national average income, and change the tax law so that any compensation to any individual (in whatever form) that exceeds a stated percentage of the chosen self-adjusting figure -- in my mind, 250% of the national median income seems about right -- would not be deductible from the company's taxable income.

So AIG and Goldman, Sachs are still perfectly free to pay their worthless executives exorbitant figures for ruining the entire economy of the country; they just don't get the rest of us to pay for part of it, in the form of lower corporate taxes.

It's really that simple.

Those Crafty Europeans

The surprising gift of the Nobel Peace Prize to Barack Obama last week raises certain concerns about what our friends across the pond are up to. Since, as he modestly acknowledged in his response to the announcement, the Big O has done nothing yet to deserve the award, three possibilities come to mind to explain just what those Norsemen are up to.

First, there is the possibility that the award is meant as a slap at the previous administration. Personally, I think somebody should've slapped W in the face while he was in office, along about 2002, and woken him up to the vile and festering corruption of all the principles he purports to hold dear: freedom, equality, the rule of law, and so on. His administration, which began in an atmosphere of promise, of a refreshed sense of responsibility and decency, went, in eight years, from tragedy to embarrassment to disaster: political, diplomatic, fiscal, moral, and finally economic. Maybe his daddy should've taken him to one side and delivered a Gibbs-slap to the back of the head. Well, too late now. Thank God and George Washington.

The sort of inimical creeping corruption of the Bush years seems always to result whenever licentious greed or overweening pride dresses in Vestal robes. The doors to the temple are shut, for public consumption, while the corruptors enter through the privy, and foul deeds are done in the name of whatever Noble Principle seems most at risk at the time. In Bush's time, it was Security. The 9/11 attack was one of the few vile acts of that era for which W cannot be blamed; but his administration's excessive response to that attack distracted, and continues to distract, the American public from miners digging under the foundations of our liberties. When a scratching in the earth is heard, Public Safety is trotted out, shown round the village, and taken back to the castle.

The Europeans, I have to admit, were less hornswoggled during the W era than we Americans, myself included. Less threatened by the attack on the Twin Towers, they, rightly it turns out, were not as taken in by his administration's pose as Defenders of Liberty. And so now that he is gone, the gift of the prize to his successor, for no reason other than that he is not W, may be intended as a slap at Bush and his late, unlamented regime.

Possibly.

Second, it may be nothing more than a grand gesture intended to encourage the sort of traditional diplomacy Mr Obama seems to have initiated. Barely nine months after his inauguration, the diplomatic climate around the world seems to be recovering nicely from the frothiness generated by W's my-way-or-the-highway approach. Peace has not come, to be sure, but we seem now to be approaching a time when progress might be made by consensus. A Nobel Peace Prize seems a somewhat extravagant attaboy, but given the turmoil Bush caused among Europe's chattering class, one can see how it might be viewed as the least they can do.

Possibly.

The third possibility, and the one I put the most credence in, is that the Nobel committee just wants to book Obama to speak. Can't blame 'em for that; he's the best orator we've had in our rent-house on Pennsylvania Avenue since Jack and Jackie. Considering the calibre of people we've gone for in the dozen intervening elections, that's damning with faint praise, but you've got to admit: it's nice having a guy who can speak with an elegant cadence while using three-syllable words, and convey the impression that he actually knows what they mean.