Classism At Its Best

Category: , , , , By GotDesign
A good friend of mine has an awesome bumper sticker. It reads: "I [heart] Capitalism." It warms my heart to see that my friend has both a firm grasp on how the world works, and a great sense of humor.

So when our new President has decided to force a salary cap on executives whose companies receive bailout money, I cringe. First and foremost, I don't like bailouts! Companies that receive bailouts don't learn the lessons that the market has to teach. They also do not build up institutional creativity and innovation required to handle crises. But this salary cap move also sends a sign that the Administration knows better than the markets.

When corporate executives receive sizable salaries and bonuses, I sometimes wonder if they're worth it. But I also understand that, unless I'm a stock owner, it's not my call. Senior executives are the decision-makers. Their decisions are the focal point of succeed-fail moments. A single decision can make or break a company. High salaries attract the best candidates. High salaries compensate for extreme responsibility. High salaries are the sole prerogative of the Boards of Directors.

A lot of people have made comparisons between President Obama and President Franklin Roosevelt. And there is a comparison to be made. Alan Brinkley's Wall Street Journal article "Railing Against the Rich: A Great American Tradition" is a great explanation of President Obama's blatant class warfare. Brinkley does a great job of explaining how both FDR and Hughey Long pursued a "soak the rich" policy -- as does Obama.
Franklin Roosevelt himself, trying to steal the thunder of the populists, proposed the so-called "soak-the-rich" tax, passed in 1935, which targeted high corporate salaries and investment income, even though it did little to increase government revenues or reduce the real wealth of those required to pay.
While the current economic malaise is by no means comparable to that of the Great Depression of 1929 and following, President Obama's policies belie the inner socialist that lurks within the extremely popular breast of our 44th president. When the circumstances are so different, why does Obama seek to use the same policies as FDR to spark a recovery. Because, while FDR's policies didn't spark a recovery (they actually prolonged the Great Depression and unnecessarily drew out the recovery), they did help to entrench the Democrat Party in the halls of power for over 40 years. And class warfare is the prime waeapon of the Democrats.

Truly, if you want to spark an economic recovery, why remove incentives for decision-makers to accept responsibility in desperate companies? If anything, you want to encourage the best managers to step up to help beleaguered companies out of their dire circumstances.

They way out of the economic blues lies in a few basic principles. First confidence -- talk a good game. FDR talked up some confidence when he enetered office in 1933. It was the increased public confidence in FDR's (assumed) ability to restore hope (where have I heard that before?) that allowed him to begin a series of socialist and sometimes unconstitutional policies. If confidence were restored currently, it would shore up markets and gain time to implement policies that would truly stimulate the economy. The current "Stimulus Package" is rife with corruption, payback and pork -- not stimulus.

Second, corporate tax cuts. Currently, the state and federal corporate tax rates are the highest in the world. Corporations are the entities responsible for driving the economy. Corporations are responsible for employment. Employment pumps money into the economy. The economy grows due to cash flows created by happy, purchasing peole in the markets. It's the circle of life, people! If you reduce corporate tax rates, companies can then expand workforces, invest in innovation and productivity -- in a nutshell, drive economic growth!

Third (and finally for me), encourage savings and investment. In 1990, the government of Chile moved from a Social Security system that had been the model for the U.S. in the 1930s, to a system that encouraged personal savings and investment while maintaining the security of retirement savings. From 1990 until the time I heard about it (1995), the Chilean economy grew by an average of 8% per year. It can be done here, too. And our economic engine is bigger!

Wake up, America! Open your eyes! Don't allow "hope" to lead you around blindly. There is such thing as false hope.

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