Washington to set executive salaries as auto boondoggle deepens

Posted on March 31, 2009

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Yesterday, President Obama offered a stern warning to GM and Chrysler to shape up in 60 days or face bankruptcy. To show he meant business, the administration asked for the resignation of GM CEO Rick Wagoner and strongly suggested that Chrysler work out a merger with foreign car manufacturer Fiat. Meanwhile, the President promised to guarantee the warranties on all GM and Chrysler vehicles, a move designed to buttress confidence in the automakers’ products but, in my opinion, isn’t a road we need to go down.

Auto workers are beginning to chafe against the moves, saying, quite rightly, that the blue-collar auto industry is being treated worse than the white-collar Wall Street community. They even have some limited sympathy for Wagoner, noting his push-out would have been easier to swallow if the head of an irresponsible bank had been forced out. I’ll go one step further – why not ask for the ouster of the UAW President, since the unions had a part to play in this as well? I won’t hold my breath for that, as we all know the reason a Democratic President wouldn’t dare go after the head of any union, yet has no problem demonizing the company those unions work for. And you know who comes out ahead in this? Ford, who eschewed government money and won’t be a party to this circus, and as a result will end up in a better position than its two domestic competitors by being free of government hamstringing.

Against this backdrop, the House Finance Committee, led by Rep. Barney Frank, has introduced a measure to set the pay scale for executive members taking federal money. The act is retroactive, meaning it would affect contracts already agreed upon, and it would also give Secretary Tim Geithner broad authority to set the salaries of many employees and determine by himself what “excessive” and “unreasonable” precisely means.

Ladies and gentlemen, this is not the free market at work, this is not capitalism, this is direct government control of the private sector. With the initial injection of taxpayer money into troubled companies, many lauded the action as a necessary remedy that would ease the worries. A lot of the rest of us recognized the slippery slope that we were heading down, that government money meant eventual government-dictated terms and control. Yes, you could say that some saw it coming, but that doesn’t make the pill any easier to swallow.

There’s a good chance that, despite all the taxpayer funds, GM will still be forced to declare bankruptcy. Do you believe the government intervention will at that point end? The answer, of course, is no, not because it’s necessary or because it’s the correct path – the simple reason is because government bureaucracy is a creeping cancer that is nearly impossible to scale back once unleashed. It’s always argued that it’s against the public interest to scale back government, because how would we function if certain areas were pared back? Just fine, in actuality, but government is too important a security blanket for some.

With the salary restrictions, government goes beyond a security blanket to a finger-wagging nanny who knows what’s best for all of us. Expect to see more manifestations of this attitude in the future. What’s amazing is that the author of the House Finance Committee act, Democratic Rep. Alan Grayson, seems to think only corrupt lawmakers would vote against it. “This bill will show which Republicans are so much on the take from the financial services industry that they’re willing to actually bless compensation that has no bearing on performance and is excessive and unreasonable … We’ll find out who are the people who understand that the public’s money needs to be protected, and who are the people who simply want to suck up to their patrons on Wall Street.”

Actually, Rep. Grayson, we’ll find out who is committed to the Constitution and the principle of limited government, and who is willing to sacrifice them for political points.

Update: Patterico has a good post on why freedom and capitalism cannot exist without each other. It’s a fundamental point worth strongly considering.

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Posted in: News, Politics