Politics Plus

The claim that the exorbitant bonuses may corporate fat cats receive is just the normal operation of the free market is a lie.  This article by David Bolchover explains why.

Too often, capitalism’s strongest supporters defend high executive pay, especially in the finance sector, in the belief that they are upholding the principles of the free market. This is a grave mistake. The market for pay has been distorted by self-interest, and the capitalist system they hold dear is suffering as a consequence.

Since the 2008 financial crisis, much attention has focussed on how to ensure that large bonuses do not encourage employees to take excessive risks with investors’ money. But there is another, more deeply entrenched problem — one that has passed without serious challenge, but may pose an even greater long-term danger to capitalism. That is the abuse of the term "talent" when describing senior corporate executives or finance sector employees.

These people, we are told, possess such rare commercial talent that they can rightfully lay claim to fabulous wealth. This view persists despite the absence of any reasonable method of measuring individual performance, let alone attributing a company’s financial success to it.

The myth of rare talent is propagated and relentlessly championed not just by the high earners themselves, but also by many others who stand to gain from it — their headhunters, business schools and management consultancies that sell their services to company chiefs, and the senior employees of institutional shareholders who benefit financially from the exact same myth.

Those who promote the "talent" argument repeatedly evoke an erroneous comparison with sports stars. Many people may object to the high earnings of the latter on moral grounds, but it is certainly rational to pay for sporting prowess that is highly transparent, and close to irreplaceable. Only a handful among the billions on the planet could emulate the skills and impact of Alex Rodriguez or Lionel Messi.

By contrast, the success of a company may have little or nothing to do with the alleged abilities of its most prominent employees. Benign economic conditions, a powerful and long-established brand, a lack of industry competition, smart middle managers, or just plain luck, to name but a few factors, may have had a greater influence on corporate success. It is especially difficult to pinpoint executive influence in firms that employ tens of thousands of staff worldwide.

Even if the impact of senior corporate executives was indeed measurable, what precisely is it that they do that a significant number of other diplomatic, articulate, persuasive, insightful, credible, energetic people with related experience couldn’t also do, given the right mentoring? Not everyone has what it takes, of course, but surely enough do to create sufficient competition for those top jobs. Or are we really to believe that the only people with commercial talent are the tall, white, middle-aged men who dominate Western boardrooms?

Similarly, the supposed rare talents of super-rich employee bankers have not been adequately explained. An ability to sell, while reasonably uncommon, is hardly limited to a tiny proportion, especially as it is a skill that can be transferred across sectors, once supplemented with some product training. Some bankers have undoubtedly mastered complex financial products. But aren’t there sufficient numbers of university graduates in esoteric subjects to suggest that many more people are capable of mastering complexity?

The truth is that the "talent" referred to in the workplace does not generally describe a rare ability, as it does in sport. Rather, it is duplicitously deployed to defend the positions and wealth of high-fliers in a knowledge-based economy, where the value of individual contribution is so subjective. In doing so, it serves to sanction the unwarranted plunder of shareholder funds.

In the modern world, those shareholder funds mostly belong to the population at large, through their pensions and savings. Opinion polls reveal that while American people have no problem with entrepreneurs becoming extremely wealthy, they smell a giant rat in the form of high corporate pay. The growing realisation that a small club of insiders has stolen the system from them has created a widespread popular resentment, making democratic governments more prone to heavy-handed measures that stunt growth. The brazen appropriation of wealth also discredits the entire system of free enterprise.

There are other damaging consequences of the talent myth. Excessive pay at the top of our public companies distorts the incentives for smart, hardworking people away from entrepreneurship, with all the creative energy and innovation it unleashes, and towards a life of office politics and ladder-climbing, working in jobs that many others could also do.

Of course, not everyone weighs up whether to work in a large company or go it alone. It would be hard to imagine the likes of Bill Gates or Steve Jobs patiently making their way up a company hierarchy; likewise, many people will always prefer the relative security of a decent salary…

Inserted from <Huffington Post>

Cousin FatCat says he’s too fat to fail, so we have to just keep overpaying him.  He does not want us to realize that his artificial value draws resources into rewarding zero value.  Were all the obscene bonuses banksters receive allocated to the creation of real products and services instead of empty wealth, we would all be better off.

Standing in the way of real financial reform are virtually all Republican legislators and all too many Democrats that depend on corporate cash to keep their jobs.  To solve this we need publicly financed campaigns.

I’m sorry to see it come to this.

The White House has just announced that President Obama has made fifteen recess appointments, including several for hot-button nominees. These are appointees Republicans refused to allow votes on and for which the president’s supporters have been pressing for recess appointees.

Notable on the list are Craig Becker to NLRB and Chai Feldblum to EEOC.

In arguing for the appointments the press release states: "President Bush had made 15 recess appointments by this point in his presidency, but he was not facing the same level of obstruction. At this time in 2002, President Bush had only 5 nominees pending on the floor. By contrast, President Obama has 77 nominees currently pending on the floor, 58 of whom have been waiting for over two weeks and 44 of those have been waiting more than a month."…

Inserted from <TPM>

I’ll be the first one to admit that I screamed bloody murder when Bush did the exact same thing.  But there’s a difference.  Democrats only filibustered most extreme ideologues, and even then, only to sensitive posts.  Ob the whole, the left has been quite disappointed with Obama’s appointments, because most of them are so centrist.  Considering the role we played in putting him into office, he has denied us our fair share of seats at the table.  Still, the GOP had blocked virtually all of them.  Therefore, Obama’s recess appointments are completely justified.

For the complete list, click through to the source.

Alan Greenspan has his eyes on the Social Security benefits for which you have paid all your lives.

Like every other major institution in the public and private sectors, Social Security has taken a few licks from the current recession. But the problems are simply not very serious — the entitlement program’s trust fund currently stands at a massive $2.5 trillion — that’s trillion with a "t." If the federal government makes absolutely no changes to Social Security whatsoever, the program is currently projected to remain fiscally fit through 2037. The effects of the recession are included in that projection — prior to the financial crash of 2008, Social Security was projected to remain solvent through 2041.

 

But pesky facts like that are not the focus of the story from Times reporter Mary Williams Walsh, who instead highlights a fundamentally meaningless statistic to needlessly frighten her readers:

This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016.

That threshold would indeed be important — if Social Security weren’t sitting on an additional $2.5 trillion. Walsh dismisses the trust fund — putting the term in scare quotes and calling it a mere "accounting device." And, in fact, the trust fund is an accounting device — just like bank reserves and dozens of other financial metrics used in the business world. What that accounting device shows is that Social Security is fundamentally stable from a fiscal standpoint, to the tune of $2.5 trillion. There’s nothing fishy about it.

 

If that $2.5 trillion ever runs out — which it won’t, because Social Security’s revenues will increase in a few years as the economy recovers — policymakers would still actually have plenty of options available for boosting the program. But according to former Federal Reserve Chairman Alan Greenspan, there’s only one truly viable course of action — draconian benefit cuts for seniors. Here’s the Maestro, from Walsh’s article:

When the level of the trust fund gets to zero, you have to cut benefits . . . . Because of the size of the contraction in economic activity, unless we get an immediate and sharp recovery, the revenues of the trust fund will be tracking lower for a number of years.

Greenspan, lest anyone forget, is one of the people most responsible for moving Social Security’s solvency projections from 2041 to 2037. Our current recession was caused by rampant financial excesses that Greenspan actively refused to regulate and a housing bubble that he explicitly refused to act on. To the extent that today’s government finances are constrained, the two major culprits can both be laid at Greenspan’s feet — the bank bailouts that were deployed to clean up his mess, and the lost tax revenues from job losses and plunging home values.

 

So it should come as no surprise that Greenspan is simply wrong about even the hypothetical need for benefit cuts. If — under a wild, unthinkable set of economic circumstances — Social Security did one day find itself in a fiscal hole, the government could always simply increase Social Security taxes or tap revenues from other government programs. In fact, when Greenspan himself was part of a commission to fix Social Security in the early 1980s, that commission did not cut benefits — it raised taxes. Policymakers would not need to cut benefits — Greenspan simply prefers that they do, because he doesn’t like the idea that the government should be providing safety nets for the elderly.

 

That’s a perspective shared by Wall Street billionaires like Peter Peterson, who has pledged a massive fortune to spreading the message: Save the bankers and brokers first — everyone else, including seniors, is expendable… [emphasis added]

Inserted from <Alternet>

Social security benefits have been a GOP target for years.  Every penny spent reimbursing seniors is a penny that can’t spend on a millionaire.  But any solvency problems Social Security may have can be corrected with one simple fix.  Remove the salary cap.  The current rate and cap structure is a social security tax of 6.20% (matched by employer) of income up to $106,800.  The bankster with a $20 million bonus pays the exact same dollar amount as someone making $106,800.

Consider the current distribution of wealth in the US.  The richest 20% have most of the pie.  The bottom 40% have that tiny sliver, only 0.2% od the total wealth.  The Social Security tax structure is regressive, because it disproportionately protects the income of the rich at the expense of the poor and middle classes.  That is the sole cause of the problem.  No other fix is acceptable.