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March 29, 2009

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Hilzoy, have you ever read the Philadelphia Inquirer? Or any newspaper? Or have you ever read anything whatsoever? If so, I think you have to acknowledge that some of the blame--probably, most of the blame--for this situation lies with you.

Yeah, hilzoy. This is all your fault for....um, what exactly?

JS, I am not saying that the point you are trying to make is invalid or silly or anything else. I am just saying that I will be damned if I can make out what exactly that point is. Could you please spare a moment to clarify what in the world you are talking about?

For years when I would rail against obscene executive pay, the standard reply (from deluded slobs as poor as me) would be
"You're just jealous because you can't earn that much..."

To which I developed the reply,
"Yeah, I'm a bitter, twisted, passive-aggressive nobody who bites his knuckle each evening with his head on the pillow at the delusional view that the world has conspired against me. Now - returning to the discussion that the executive pay is obscenely out of proportion..."

don't worry, socraticme, i for one can recognize primo snark when I see it, and that's what mr. schwarz has brought us. had me laughing.

on to the unintentional funny, i like how the company says the newsroom has been paid "and the checks have cleared," as though that's really going above and beyond.

i mean, we paid you already. and now you come back asking for the checks to clear? how demanding! next they'll want turtle soup from a silver spoon!

any time you're dealing with people who think they can collect brownie points because their paychecks don't bounce, you know you are dealing with men of integrity. the kind of people who would deduct taxes and pensions from your paycheck and then pocket the cash.

if we only had a war going on, we could shoot these guys as looters.

oh, that's right: we do have a war going on. two of them. and our last commander in chief said that the war zone covers all fifty states. cigarettes, gentlemen?

socratic_me:

Yeah, hilzoy. This is all your fault for....um, what exactly?

The fact that you are using the English language to ask this question demonstrates this is also all your fault.

Jonathan Schwarz: Maybe I'm really dense, but I still don't see what you're getting at.

What kid bitzer said: Mr. Schwarz is engaging in some scrumptious sarcasm here, and my hat's off to him.

A little context may be helpful here.

It's an old story: management rewarding themselves with "bonuses" for running a company into the ground. I'd suggest adding a "clawback" provision to the bankruptcy laws forcing recipients of such bonuses paid during the last two years before filing bankruptcy to disgorge their "bonus" payments, and to make "retention bonus" plans after the filing subject to court approval. We could throw in an "unless approved in advance by a majority of the shareholders at a noticed meeting" clause for publicly-traded corporations - maybe some public notice provision for privately-held corporations.

Retention bonuses have their place - they motivate people to continue working in situations where they'd otherwise pack up and leave. However, such payments too often go to the people that ran the company into the ground and not to the folks who could turn it around. Transparency would discourage abuse.

Jonathan Schwartz: *giggles* ;)

careful, hilzoy; your thoughtless giggling there just caused the global malaria epidemic.

you should take your responsibilities more seriously.

" I'd suggest adding a "clawback" provision to the bankruptcy laws forcing recipients of such bonuses paid during the last two years before filing bankruptcy to disgorge their "bonus" payments, and to make "retention bonus" plans after the filing subject to court approval."

Which has precisely zero relevance to AIG's circumstances, because AIG is not bankrupt. It also adds a rather viciously ill thought out element of retroactivity to our law, exactly what the ex post facto clause is supposed to bar. Hell, who'd make any contract with anybody whose circumstances are even the slightest bit questionable, if you couldn't count on payments received not later being taken away?

Should have been bankrupt? Darn tooting! This notion of "too big to fail" has to die, it should never have been permitted to get started, as those of us who opposed the Chrysler bailout insisted.

But, AIG did not go bankrupt, the point of the bailout was to prevent that. The government, having acted at considerable expense to the taxpayer to keep AIG out of bankruptcy, is not entitled to proceed as if AIG did, none the less, go that route. It didn't, it sill owes it's creditors, including it's employees, everything it contracted with them to deliver.

Tierney took to patrolling the parking garage, watching to see what time employees were arriving to work and asking managers about those who were late.

Clearly the man was just doing his job responsibly, unlike the average worker.

I suspect that what is particularly galling is the contradiction between the economic philosophy preached by these Top Men and the teeming ant-like masses they lord it over. You know the whole personal responsibility thing, acknowledging the consequences of your actions, that sort of thing. Usually with a side sermon of why the world is going to the dogs - Certain People not accepting responsibility for their behaviour. Of course, none of that applies to the self-styled Galts of the world.

In a larger context, there's a certain type who vents about poor people refusing to acknowledge just how much their own personal choices figure in to their present sorry state. The type who also made those same choices but did not suffer the drastic consequences that the less fortunate often do.

One lady of my personal acquaintance was a wild sort in her younger years by her own proud admission. Pregnant in high school, from a 'good family' so the abortion is hushed up, kicked out or flunked out of four colleges before getting some sort of degree, the first two quite good. And she was kicked out of the second for some sort of drug thing, apparently involving some largish quantities of white powder.

She's older now, and responsible, and works hard; I won't take that away from her. But she does go on about welfare queens, drug addicts, homosexuals, etc, and the need for them to take a little 'personal responsibility'. Lady, if you had to accept one-tenth of the personal consequences that most people would have had to in your situation, they'd either be working at Walmart, still in prison, or looking for a job with a felony record.

I submit that this is the difference between you and me and the rich that Fitzgerald spoke of.

The "Chrysler bailout", Brett? Do you mean the one from 1979??

If you're going to cite examples of government actions as a counterargument to the "too big to fail" premise, maybe you should fine another, more recent case to cite, since Chrysler Corp. you know, didn't actually fail ; and in fact, paid back its guaranteed loans in three years.

Of course, this was nearly three decades ago, in a different world (and a different economy) - but one can only wish/hope/pray that the government's present efforts towards stabilizing the economy will have even a fraction of the success today as they did with Chrysler.

Which of course, they aren't likely to: Chrysler was just one corporation: our present travails affect the entire national economy. But on the bright side, said travails will probably provide Brett B. and his ilk frequent opportunities for snide blogposts in the near future! Silver linings!

Why should I seek a more recent example? I was pointing out when this very dangerous notion got started, and when we should have strangled it in the cradle.

The idea that a company can be too big to fail, and is thus guaranteed a bailout if it threatens to, critically contributed to the moral hazard that caused big companies to take crazy risks. They thought they weren't crazy, because they'd be protected from the downside.

Well, they were proven right, so they're going to keep doing it.

From Matt Taibbi's shredding of Jake DeSantis:

Throughout this whole period, they never were able to connect the dots -- to grasp the fact that when they skimmed a million here or a million there off the great rivers of capital that flowed through their offices, that that money came from somewhere, from someone. To them, it wasn't someone else's money, it was just money, and why shouldn't they have it?

To me this is the heart of what's wrong in both the financial sector and in corporate management generally.

These folks direct the flow of millions and billions of dollars. What they forget is that it's not their money.

It's not their money. They didn't generate the wealth and value that it represents, they put nothing of their own at risk to create it. It doesn't belong to them. They are responsible for making wise use of it, and that is all.

It's not their money.

I'd suggest adding a "clawback" provision to the bankruptcy laws forcing recipients of such bonuses paid during the last two years before filing bankruptcy to disgorge their "bonus" payments, and to make "retention bonus" plans after the filing subject to court approval.

Aren't there already provisions for disgorgement by recipients of payments made prior to the payer going bankrupt?

Similarly, I thought retention payments made in bankruptcy had to be approved by the court. These payments clearly can be useful, especially for technical, professional, and middle-management employees.

They didn't pay their employees' 401k contributions

Isn't this theft ?
And prosecutable as such?

They deducted money from employees' paychecks on pretext of transmitting those funds to employees' accounts, and instead kept it.

Isn't this theft ? And prosecutable as such?

They deducted money from employees' paychecks on pretext of transmitting those funds to employees' accounts, and instead kept it.

You would think people would get angry about this...

i like how the company says the newsroom has been paid "and the checks have cleared,"

That wasn't the company. Stu Bykofsky is a columnist for the Daily News.

How do proceed from affirming the sanctity of contracts to calling for Chapter 11 bankruptcy? If the first principle of public policy is that contracts can't be breached, then Jake DeSantis and friends should be in debtors' prison working off their $500 trillion in debt.

russell,

Please do not leave out the education establishment and its institutions.

Move along, nothing new here. About 8 years ago, one of my relatives worked as the comptroller for a snack food manufacturer in south central Pennsylvania. The senior management gave themselves very large raises, quietly of course, then told the employees that times were so tough that everyone, including senior management would have to take a pay cut. The % cut would be the same for everyone, management stressed, so it would be fair. My relative knew that the management's secret pay raises more than covered their pay cuts and hence that it was only the grunts who were bearing the brunt of the cost reduction. Unable to work for a bunch of liars and flim-flammers, my relative quit. We all stopped buying their potato chips!! Not that they noticed.

I once worked for a company which sold a division to another company. There were no retention bonuses paid to keep people -- except that, when the SEC documents were published, somewhere around half a million was actually paid in retention bonuses.

It gradually leaked out that the entire amount was collared by the top two people in the division, who not only didn't pass any along, but didn't even tell anybody else there was money for retention bonuses.

I personally know of several other instances of this behavior. This level of executive greed is now endemic in the entire corporate culture.

Speaking only for myself, I noticed that my motivation to work those extra hours for the corporation declined after that episode. With each successive episode a further decline took place, until today I have a negative motivation to work for a corporation at all.

It also adds a rather viciously ill thought out element of retroactivity to our law, exactly what the ex post facto clause is supposed to bar.

An ex post facto law is one that is passed after the act is committed, not one that affects acts occurring after the law is enacted based on events consequent to those acts. The canonical example of an ex post facto law is making an act that was legal at the time it was performed retroactively illegal. The principle is that people ought to know the legal consequences of their actions when those actions are chosen, and this proposal doesn't violate that at all.
There are all manner of situations where future events affect sentences, fines, civil penalties, legal obligations, etc.

Which has precisely zero relevance to AIG's circumstances, because AIG is not bankrupt.

Hint: when you're the first person to mention something in a thread, you ought not be surprised that the rest of the thread isn't relevant to the thing you just brought up. (I should say "doesnt appear relevant to you", since you're the only one who believes the extraordinary proposition that because AIG was not forced to declare bankruptcy that they must therefore be treated as a normal company in every respect).

Please do not leave out the education establishment and its institutions.

?????????????

Not sure I follow.

"Hilzoy, have you ever read the Philadelphia Inquirer? Or any newspaper? Or have you ever read anything whatsoever? If so, I think you have to acknowledge that some of the blame--probably, most of the blame--for this situation lies with you."

Don't let her off the hook so easy! Even if *Hilzoy* hasn't ever read anything, surely some among her friends, family, and neighbors have! Don't you see? We *all* bear responsibility if there's even one reader among us! We made access to books to easy, what with all the libraries and bookstores! We even taught reading in school! Don't blame the good people at the Inquirer--the blame lies with all of us!

Too easy, even.

I think Kid Bitzer is being funny with his remark about there's a war on and we should shoot the corporate looters. Here's what I'm no longer able to think of answer to, though it appalls me that I can't: WHY is it funny?

Look, I'm pacifistic by nature -- I'm sure most of us at Obsidian Wings are. I've opposed all of the U.S.'s interventions in the Middle East; I opposed the attacks on Grenada and Panama; I understand and respect Nicholson Baker's and also Daniel Larison's case against having invaded the Germans in World War II, although I don't agree.

But when our own country has been attacked -- "the Big Takeover" in Matt Taibbi's terms, "the Quiet Coup" in Simon Johnson's -- and when it's patently obvious that the government is close friends with the attackers, even though the government was elected on a promise of Change ... well, you know, the American Revolution was extremely violent, with a death rate that would be equivalent to 5 million people killed today. I don't want 5 million people dead, and I'm vehemently opposed to killing anyone in the government. But as far as I can tell, the ONLY way to bring the thieves to justice, and indeed the only way to stop the government from helping them steal from us again and again and again, is vigilantism.

I know that's the sort of thing Rush Limbaugh and Michael Savage do, but they do it in a fact-free zone, and they want to overturn elections by targeting politicians. I'm not sure they discredit the entire idea. I'm not sure "Thou shalt not kill" does either, given all the evidence in the rest of the Bible that God wasn't really serious about that.

I'd love to have someone here convince me I'm wrong: please, go for it. It's a creepy way to feel, and I'm certainly much too gutless to perform any violence myself, which makes me a little more like the 101st Keyboarder Division than I can handle.

On the other hand -- and this is the first time in my life I've ever felt this way -- I'd be equally happy watching some nice hangings around K Street or at Goldman Sachs. Because I'm scared, I'm angry, and I just don't see any future for the economy we have. Or any lawful fixes on the way.

Before I get banned: I'm NOT calling for anyone to be killed. I want to think vigilante killing is a terrible idea, the way I always have before. I'm just asking for help getting to that state.

voxpoptart,

How is government aligned with corporatists stealing money different from government aligned with progressives stealing individual liberty?

russell,

are you comfortable that the cost of education in the US is reasonable or could it be that someone is making a killing?

GoodOleBoy: I believe that government, allied with progressives, can enhance individual liberty: that people who are adequately fed, who are protected from 80-hour or 120-hour work weeks, who are protected from deadly toys and deadly medicines and deadly foods, who are able to use government-funded and government-researched inventions like the computer and the Internet, have more freedom than they had otherwise. And more wealth, even after taxes.

More to the immediate point, it's not customary for free, non-government individials to loot millions of dollars for the purposes of, er, progressive political activity.

C'mon, someone can please do better than that.

"...could it be that someone is making a killing?"

Um, who, exactly?

Is there a tax expert out there? What are the tax implications of the way all these executive compensation plans are put together with bonuses??? The more I've heard about them, their ubiquity and and their detachment from performance, the more I've suspected that there's some other very important angle. Are these compensation packages built around big bonuses a way to route money around the tax obligations of the "little people?"

are you comfortable that the cost of education in the US is reasonable

Hard to say.

Nationmaster says we have the highest education expenditure as a percentage of GDP of any OECD country. We pay 7% of GDP, the range among OECD nations is 4.6% -> 7%.

I don't think we have the best outcomes, so we're probably not getting best value for dollar among our peers.

I don't know if the degree to which that is true exceeds the bounds of "reasonable" or not.

or could it be that someone is making a killing?

I don't think anyone involved in public education is rewarding themselves with compensation in the 7, 8, or nine figure range.

So, to address the sense of your post, no, I don't think the two cases are comparable.

How is government aligned with corporatists stealing money different from government aligned with progressives stealing individual liberty?

I'm sure I'm opening a big old can of worms, but can you give me some concrete and reasonable examples of how your individual liberty has been stolen in the name of any part of a 'progressive' agenda?

What are the tax implications of the way all these executive compensation plans are put together with bonuses???

I'm no expert, but my understanding is that amounts in excess of $1 million paid as salary to top execs are not deductible to the corporation.

OTOH, payments that meet certain criteria to be "performance-based" are deductible. These include bonuses, options, etc, provided some formalities are met.

So yes, there are tax issues here.

"How is government aligned with corporatists stealing money different from government aligned with progressives stealing individual liberty?"

One is money. The other isn't. HTH.

(Additionally, money, by nature, is quantifiable; what quantifiable metric do you suggest we measure the degree of "individual liberty" you and others have? And also: "The law, in its majestic equality, forbids the rich as well as the poor to beg in the streets, steal bread, or sleep under a bridge." The individual liberty, in practical measure, of a well-off person, and an impoverished person, are not the same.)

just to be clear, i want to state for the record that my proposal above was *not* meant to be taken seriously, and furthermore i am *entirely* opposed to it.

cigarettes are a major cause of health-problems, even for second-hand smokers.

How is government aligned with corporatists stealing money different from government aligned with progressives stealing individual liberty?

Posted by: GoodOleBoy

Do you have something quantifiable in mind? I'm usually not sympathetic to these sorts of arguments, as they lead to absurdities such as saying that killing all first-born Palestinians by napalm in front of the Knesset is no different from the Palestinians using rockets as 'psychological terror weapons.'

So let's see what these freedoms are, and how you value them. If you want to say that the legal requirement to carry a license on you while driving is just as bad as hundreds of billions of dollars going to AIG, especially without explaining why, I don't think you'll find too many sympathetic listeners.

Maybe it's time to tell Delaware that they cannot have any more corporations incorporate in their state. Clearly, Delaware doesn't care if the managers screw the shareholders.

Carl Icahn had more about this in his NYT Op-Ed

Simon Johnson's The Quiet Coup article is here.

"but can you give me some concrete and reasonable examples of how your individual liberty has been stolen in the name of any part of a 'progressive' agenda?"

Last time I looked, gun control was part of that agenda. For that matter, there are a lot of things on that agenda that involve the government spending money, and it can't do that without stealing part of your liberty; Those wages the government takes are, for all practical purposes, stolen hours from your life, that you spent laboring for the government, and not yourself.

I could come up with other examples. Yeah, the progressive agenda has a serious impact on liberty. You might figure it's of net benefit, but you can't claim you're not curtailing peoples' liberties without being awfully careful to define away any liberty you find inconvenient.

Those wages the government takes are, for all practical purposes, stolen hours from your life, that you spent laboring for the government, and not yourself.

The classic libertarian argument, if you can call it that: while enjoying all the benefits of a country with a functioning government, never quit complaining about having to pay for those benefits. Libertarians seem to believe that all the benefits they enjoy just magically appear - while the taxes they pay as magically disappear.

Having to pay for the benefits you enjoy can only be regarded as an assault on liberty by the kind of person who regards it as a point of principle to never pay for a meal in a restaurant when you can get away without doing so.

I'm paying for benefits, AND I'm paying for harms. Some days I think more of the latter than the former.

And while I'm willing to pay for those benefits, I never forget for a moment that they come with a cost, and have nothing but disdain for those who want to forget that the cause they espouse is not without it's cost to other people, who want to think that there's no downside to what they're advocating.

It's very important to remember that what you're buying has costs, especially if they're costs born by other people; Forget that, and you'll buy too much.

I think the progressive agenda is in large part a drive to get people to buy more government than they'd ever agree to, if they realized how much it would cost them.

So, of course you get testy when people bring up the costs, and get all hysterical. You're trying to make a sale here, you don't want the customer looking at the bill.

Brett: And while I'm willing to pay for those benefits, I never forget for a moment that they come with a cost, and have nothing but disdain for those who want to forget that the cause they espouse is not without it's cost to other people, who want to think that there's no downside to what they're advocating.

That's odd, Brett, because it perfectly summarizes my feelings about the libertarian philosophy of life - I have indeed nothing but disdain for those who espouse that cause, since they always want to think that there's no downside to what they advocate, and never seem to remember that there's a cost to other people for their own "liberty" - that is, not having to pay up for benefits received.

Last time I looked, gun control was part of that agenda. For that matter, there are a lot of things on that agenda that involve the government spending money, and it can't do that without stealing part of your liberty

I think the gun control issue has some merit in some jurisdictions.

The paying taxes thing, not so much.

If we had a truly confiscatory tax regime, or one in which citizens had no influence on tax policy, maybe you'd have a case there. Neither of those things are true.

IMO the strongest case to be made there is "taxes are higher than I would like them to be" and/or "I don't like a progressive income tax".

If you can convince about 100 million other people to think likewise, your preferences can become reality. Because we are talking about preferences here, not realistic examples of your individual liberty being stolen from you.

Taxes are a part of common, civil life. It's been that way since at least the end of the stone age, and I mean that literally.

And believe you me, we all pay for things we don't care for. It's one of the downsides of living in a civic community.

And at the end of the day, you can always go live off the land. No property, no income, no taxes. Easy peasy.

Personally, when I think of things like a loss of individual liberty, I think of being held without charge or recourse to writ of habeas. I think of having my personal property seized, not through reasonable taxation, but outright, under the color of a 'war on drugs'. I think of extraordinarily punitive forms of incarceration that expose people to rape and assault, and which quite often drive people into psychosis.

Stuff like that.

And it seems to me that all of those policies are driven from the conservative, rather than the progressive, side.

So I'm curious to know what actual, concrete individual liberties have been stolen from you, or good old boy, or anyone you actually know.

Last time I looked, gun control was part of that agenda

The last time you looked it was the early 90s? I haven't seen much fuss over gun control since then. (nb I am sure that some on the left still want to ban all guns, just as some on the right want to overturn Brown v Board of Education. Just don't see how they're relevant to the mainstream).

I could come up with other examples. Yeah, the progressive agenda has a serious impact on liberty.

Shame that your only example is somewhat old. Makes it hard for someone to debate with you, claiming to have a sackful of examples but not wanting to expose them to the light.

I think the progressive agenda is in large part a drive to get people to buy more government than they'd ever agree to, if they realized how much it would cost them.

You think that the progressive agenda is, in large part, a drive to buy stuff with no regard for what that stuff is in particular? This is as insightful as people who think American foreign policy is driven by a desire to kill brown people.
It also makes it easier for you to keep that sack of yours closed- now you can just debate on the merits of 'should we spend a lot of money with no regard for how it's spent', a rather dubious proposal.

So, of course you get testy when people bring up the costs, and get all hysterical. You're trying to make a sale here, you don't want the customer looking at the bill.

Is someone getting testy and hysterical? Ad hominems work better when they're aimed properly.

btw, you going to say anything else about the whole ex post facto thing? I would think less of you if you're going to put up the rather serious charge of a Constitutional violation without either withdrawing or affirming it when challenged.

"I think of extraordinarily punitive forms of incarceration that expose people to rape and assault, and which quite often drive people into psychosis."

Such as solitary confinement.

"Besides the union members postponing their $25/week raises, the Inquirer laid off 71 people in Jan. 2007, laid off 68 people in Feb. 2008, and laid off 35 more people last December. And those are just the layoffs I could find with a quick search."

Probably a lot more, since these lists are just Newspaper Guild employees. While more people are in the Guild than just writers, many classes of employees don't fall into the Guild. The ever-expanding Information Technology department, for one, tasked with more and more work every year, probably took as big a percentage beating as the more-visible journalists, though in most newspapers few, if any, IT people are covered by the Guild.

As for making it possible to rescind bonuses over a certain span of time? Most people aren't just going to leave the money in a savings account for three years waiting to see if their bonus really did exist.

Making those profits rescindable would guarantee that that money wouldn't ever be spent on anything solid that remains in the US, since rich people are smart enough to use the "can't get blood from a stone" concept. This would probably damage the luxury goods and expensive housing markets even further.

Which doesn't sound like a big deal until you realize that a lot of people who work in those industries, like my nephew, who installs high-end electronic systems in yachts, would be working less, or out of a job entirely.

"You think that the progressive agenda is, in large part, a drive to buy stuff with no regard for what that stuff is in particular? "

No, I think progressives have a clear conception of what they want. I just think that what they want is more government than the public would be willing to buy if they had a clear notion of the cost. So it's in your interest to see to it that they don't get a clear idea of what you want them to give up.

"So it's in your interest to see to it that they don't get a clear idea of what you want them to give up."

Okay, Brett: give us a clear and specific set of concrete examples of what we want them to give up.

I just think that what they want is more government than the public would be willing to buy if they had a clear notion of the cost.

I don't think you even have a clear idea of what you mean by "more government", except that it's associated vaguely in your mind with an equally unclear concept identified by you as "progressive agenda", both of which you have decided, without really knowing what they are, as "expensive" and "bad". Given that your notion of an assault on your liberties is being required to pay taxes for benefits received, your notion of "progressive agenda" seems likely to be equally sensible and thoughtful...

I just think that what they want is more government than the public would be willing to buy if they had a clear notion of the cost.

Libertarians should shut up and eat their peanut butter. Unless they think that a sandwich that won't kill you comes at "too high a cost".

Maybe now you're not a libertarian...

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