January 30, 2009

Rudy!'s Tin Ear

Ever a believer in trickle-down economics, Rudy! defends banks and other businesses that received bailout money paying their executives big bonuses with what look like taxpayer dollars. Now, I think there's something to the idea that when people have money, they spend it, and this creates economic activity and wealth in a generalized sense as well as enlarging the tax base for various levels of government. So it's not like, if you read everything that Rudy! says, it's just weird and wrong. But I still have two problems with this.

First, Rudy!'s timing is all wrong. This is about the worst time imaginable to be offering yourself in the public forum as a defender of really rich bank executives paying themselves millions of dollars in bonuses. The public has something of an idea that those same bank executives made a bunch of risky loans and when things didn't work out, they dragged the whole country down into the economic morass that resulted from that. And there is some truth to that perspective on things, too.

Second, assume, arguendo, that we should credit Rudy!'s defense of trickle-down economics somewhat. It's still not the case that money trickles down into hugely productive areas of the economy. Rich people already have lots of stuff. So when they get more money, they tend to spend it on service-sector consumables (stuff like dinners in restaraunts that lack menus*, litigation, rent-an-island vacations, and call girls). Now, to some extent, this is what Rudy! is talking about, but what we'd much rather see are things like durable-goods purchases, reinvestment in manufacturing industires, or entrepreneurship, which tend to have more powerful wealth-multiplying effects than service jobs. (I should know, I'm a service provider myself.)

I'm also a defender, in the general sense, of paying corporate leaders posh compensation. A good corporate leader should bring management and leadership to a corporation such that it generates profits for the stockholders. This is, after all, the very purpose for a corporation. But, what I favor are livable but not extravagent basic salaries for corporate leaders, with rich, scaled incentive plans. If the corporate leader can generate healthy profits for the stockholders after bringing in enough money for her own compensation, well, I say she deserves every penny of that compensation. If, however, she fails to bring in that money, she has failed to produce profits or protect shareholder value and has presumptively not earned her pay. If they produce, they should get paid phat cash, G.

And as a group, corporate leaders, particularly banking leaders, have most demonstrably failed to produce earnings and profits for their shareholders. Which is why it feels inappropriate for these types to be paying themselves the big bonuses, particularly when they've left their investors ass out and contingent on the beneficence of the government to rescue them from the mistakes made by the very people skimming that beneficience to pay themselves apparently unearned "incentives."

* With the irony that some of the fish served at said restaraunts is caught by New England fishermen in Long Island Sound, flown to Tokyo, bought by the restaraunt, and then flown back to New York City, where it is called "fresh."

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