Not only is our Democratic Congress working to deepen and lengthen this global economic downturn by igniting a set of international trade wars, our President is acting to make sure that hundreds of billions of dollars of bailout money is left in the hands of least competent business leaders.
Let me tell you a tale of two football teams.
Both of these teams had abysmal seasons. Each team won only two games all season.
The managers of these teams decide to each adopt a different strategy.
The manager of Team1 fires the head coach and goes out looking for a new head coach. In looking for that coach he agrees to pay any promising candidates what they are worth to the franchise. The better they are, the more he is willing to pay them.
The manager of Team2 tells his head coach the he can keep his job. He then announces a salary cap for the head coach position that is so far below the industry average that he guarantees that any good head coach will have better offers elsewhere and would have no interest in taking over the position.
Now, I want you to place bets as to how these teams will do in the next season.
Ultimately, we are not concerned with the fate of two imaginary football teams. We are talking about the best way to manage America out of its worst economic downturn since the 1930s. We are looking at two potential futures for the American economy – the future of Team1, versus the future of Team2.
Where Team2 seems to be the direction Obama is leading us.
A couple of days ago, President Obama announced that there will be salary caps on the executive positions of companies that receive federal bailout money. This virtually guarantees that the money will be placed in the hands of managers who are not the most gifted business leaders on the planet.
Those business leaders will have better offers elsewhere, and will likely take those offers.
There is a chance, however small, that some underappreciated business genius may get into one of these positions and show what he is made of. Yet, even here, the instant that he has proven his worth and what he can do for a business, we can expect the job offers to start coming in, and it will not be long until he decides to accept one of those offers, leaving his former position open to the next (probably incompetent) person in line.
I agree that business leaders have been overcompensated recently. The fact that a business leader gets paid $30 million does not imply that he is actually worth $30 million. In fact, many of our current highly paid executives have proved their incompetence.
It may be (and probably is the case) that we can get competent business leaders for significantly less than what companies are currently paying.
Yet, this does not speak in favor of a salary cap. First, you find the competent leaders. Then you negotiate a salary that will get the competent leader into that position. And you go with the best bargain (the best leader at the lowest price).
Well, actually, first you get rid of the incompetent leaders who lead their businesses into this mess. That has not been done yet, but it should be. The executive offices of businesses getting billions of dollars in government bailout money should be fumigated.
However, after those existing executives have been removed, their replacements should be paid what they are worth. If the most promising manager demands $1 million or he will take a job elsewhere, then he should be given his $1 million and be put to work clearing up this hundred billion dollar disaster. It makes no sense to put a hundred billion dollars under mismanagement for the sake of half a million in salary.