Blog Envy II - Limits on Pay Edition

MANDATORY MARCUS

I find myself once again suffering from blog envy.  Oh, to have authored this:

"Yes, it is high time that pay and investment guidelines be mandated for all top level executives who may in the normal course their daily work push the entire economy too close to or even over the edge of systemic risk falls. If nothing else, this Great Recession has taught us that top executives can practically capsize the economy.

But the chief concern is not with presidents and vice presidents of too-big-to-fail banks and other bailed-out enterprises. As large as they are, they are small potatoes relative to the big generators of systemic risk. The critical concern is with top government executives who can create national and international panic, lay the groundwork for international inflation or deflation, and just by voting and writing regulations can change the risk profile of entire industries.

We taxpayer/investors demand a set of risk-sensitive compensation guidelines that will mandate pay and wealth-management rules for all federal government top executives starting with the president of the United States and all cabinet members and their deputies. While we’re at it let’s include all members of Congress and every member of the commissions and boards that manage the nation’s independent agencies, including, of course, the board of governors and chairman of the Federal Reserve System.

To properly align incentives of these elected and appointed executives (and others), we demand that each and every one be paid a base pay — some 75 percent of the current salary — plus incentive pay — the remaining 25 percent — based on improvements in real GDP growth over a five-year period that begins the day of their appointment or election. The base pay would be provided on the normal Office of Personnel Management pay schedule. The incentive pay, with recommended details worked out by Feinberg, would be provided on the basis of a three-year rolling average gain in real GDP, which means that the first incentive payment would be received three years after an executive’s first day of office.

But this deals with just part of the incentive misalignment. We must align incentives associated with government executive wealth.

Elected and appointed government executives routinely place their personal investment portfolios into management by a blind trust. While this action satisfies those who may be concerned primarily with ethics
and upright behavior, simply being blindfolded as to capital gains and losses does not get to the systemic risk problem, which of course, is our chief concern here.

All high government officials described earlier must have their personal portfolios invested in a visible S&P 500 index funds, not to be redeemed until one year after leaving office. We taxpayer/investors do not want our executives blindfolded as to gains and losses. We want them to know exactly what is happening to the Great American Bread Machine, our economy, while they are in office. We want them to feel our pain and our gain.Feinberg and Bernanke should focus efforts on those whose actions can capsize the economy—the top executives and elected officials in Washington. The others are small potatoes."


You can read the entire article from which this excerpt comes right here; written by Bruce Yandle.

My only comment is that paying the elected officials noted above 75% of their existing salaries is still too generous.  All elected officials should be paid a base salary equivalent to the median US family income (currently just a bit over $50,000/year).  Base salaries would rise and fall accordingly as would the above noted incentive pay. 

Our elected officials have for too long been throwing their stones from an ivory tower...it's time they moved into glass houses of their very own.

Mandatory Marcus Sentence of the Day

MANDATORY MARCUS


From denverpost.com; this sentence sums things up nicely...

"...we can save billions by funding a plan that uses billions of wasted tax dollars from another public plan that we already supplement with billions. Make sense?"

 

Mandatory Marcus Book Passage of the Week

MANDATORY MARCUS

"In fact there was only one species on the planet more intelligent than dolphins, and they spent a lot their time in behavioral research laboratories running round inside wheels and conducting frighteningly elegant and subtle experiments on man.  The fact that once again man completely misinterpreted this relationship was entirely according to these creatures' plans."


- The Hitchhiker's Guide to the Galaxy by Douglas Adams

First Things First

MANDATORY MARCUS

So today it appears that the House health bill now carries with it a one trillion dollar price tag over 10 years.  Surprisingly spending one trillion dollars is also somehow going to reduce the budget deficit.

I've heard of addition by subtraction...but I've never heard of subtraction by addition.
 
If you are like me you probably want some perspective on what exactly one trillion dollars means.  Its an easy number to say, but its so big its practically abstract.  So here's some perspective for you:

• $1,000,000,000,000 - that's a one followed by twelve zero's; a thirteen figure price tag.
  
• One trillion seconds = 31,688 years, 269 days, 1 hour, 46 minutes and 40 seconds.
• One trillion dollars in one dollar bills would weigh 2.2 billion pounds (1.1 million tons).
• It would take a military jet flying at the speed of sound, reeling out a roll of dollar bills behind it, 14 years before it reeled out one trillion dollars.
• One trillion one dollar bills laid end to end would stretch from the earth to the moon 200 times before running out of bills.
• With one trillion dollars you could buy a $3 latte every day for 900 million years.
• One trillion dollars is greater than the entire GDP of Australia.
• One trillion dollars would buy every single stock on the Toronto stock exchange.
• One trillion dollars would fund the military of every NATO country combined.

O.K....so you get the point.  It's a lot of money.  So how exactly does spending it cut the deficit you ask?

"The proposal would recoup these costs, and then some, through revenue from various sources, including $201 billion in taxes on high-premium insurance plans, and $404 billion in spending cuts for Medicare, Medicaid, CHIP, and other federal programs." - This according to the Congressional Budget Office (CBO) as reported by Medscape (part of WebMD).

After ten years the cost savings and additional revenue will allegedly increase more rapidly since the initial cost of expanding coverage would have already been absorbed.  So what they are saying is that after ten years this plan will reduce the budget deficit even more and at an even faster pace. 

Dare I bother to point out the fact that raising taxes on some insurance plans isn't a cost saving measure...it's an arbitrary government imposed price increase that will likely lower the number of such plans in the future; which will in turn lower the revenue collected and thus not lower the deficit as planned...but why let logic get in the way of such a grand plan?

I like to think I'm a reasonable person.  I like to give people the benefit of the doubt.  But history shows over and over and over that politicians won't reduce spending on anything if it might cost them a vote.  Do you think that maybe when the time comes to cut spending on Medicare, Medicaid etc. that there will be a political element to that decision?  I mean it all looks nice on paper until you realize that every single time in the past that we have considered cutting spending in these areas we end up spending more.

So how about a compromise?  I'm willing to be reasonable. 

First...you (Congress) cut Medicare, Medicaid, CHIP and other federal programs by the $404 billion amount you are alleging you will and then we can talk about taking on the one trillion dollars worth of spending you want.

You know...if you had made those auto companies restructure first...and then decided whether to hand out $81 billion, we might not have just lit that $81 billion on fire the way we did by handing it out first and then hoping for the change that never came.  It wasn't that long ago...so come on Congress...stretch those mental muscles and try to remember what we got for doing things in the wrong order.

Maybe...just maybe...we should do the hard part first and make sure it gets done before we just hand over one trillion dollars to a congressional body that has a clear, indisputable track record of throwing good money after bad.

Alternatively I guess we could just buy Canada and rename it "public option". 

Some Simple Questions

MANDATORY MARCUS

Over the past few weeks a number of questions have come to mind that I figured I may as well ask here:

• If Congress actually votes on matters that have national implications (and they do); why don't Congresspeople have to run in National elections?  After all...Barney Frank chairs the House Financial Services Committee and Charles Rangel chairs the House Ways & Means Committee; both of which have profound national implications on things like financial regulation and tax law...shouldn't the people in California, Louisiana, Montana etc. get a say on who is going to be making rules that effect them?

• If we are going to pass a health care bill that requires cost participation from both the States and the federal government in the expansion of state Medicaid programs...why does Senate Majority Leader Harry Reid's State of Nevada get to avoid the additional taxes?  Oregon, Rhode Island and Michigan also get to avoid the additional State tax.  What do they all have in common?  They are all well connected Democrats looking for you and I to pay more so that their constituents can pay less.  And it probably goes without saying that they are all up for re-election and are considered to be in close races with Republican challengers.  Hmmm....so the rest of the Country will have to pay more so these politicians' constituents can pay less, thereby increasing the chances that these particular individuals remain in office?  My vote would be to tax me less and let them all lose their seats.  (National elections anyone...?)
  

• If the health care bill under consideration includes a 40% tax on "high value insurance plans" (and it does) and that means any plan that costs more than $21,000/year...why do 17 States with mostly large Union populations that enjoy exactly this kind of "high value insurance" get a higher threshold?  You might want to ask Chuck Schumer from New York who probably doesn't want to have to deal with a bunch of angry New York Union Members at election time.  (National elections anyone...?)

• Why can't we have one issue per item of legislation?  One issue; one bill.  That way nobody gets to hide behind a veil of "compromise" to explain why they voted for a single bill that contains totally unrelated and frequently contrary issues.  Like that one that passed containing the "credit card bill of rights" and also allows people to carry loaded weapons into National Parks.  What do those two thing have to do with each other anyway???  Seriously...vote an issue and own it.  If you don't get re-elected then go find a real job like the rest of us.

And finally....

• Where's my Nobel Peace Prize?  Two days ago I prevented my cat from getting into a fight with a neighboring cat who wandered too close to my front door...that right there means I've done at least as much as the President to qualify; and clearly that's not enough to win a Nobel Prize.

Mandatory Marcus Quote Of The Week

MANDATORY MARCUS

"Everyone wants to live at the expense of the state. They forget that the state wants to live at the expense of everyone."

- Claude Frederic Bastiat, 1801-1850

Less Is More IV

MANDATORY MARCUS

Remember those retail health clinics we talked about just a few days ago?  This Wall St. Journal article points out that they are already expanding services and driving doctors' groups and hospitals to react in two entirely predictable ways:

1. They are pressing insurance companies on co-payments to these facilities to eliminate any financial incentive to use them.  (We'll call this the bad response)
2. They are acting more competitively themselves:  Doctors offices are expanding office hours into evenings and weekends and hospitals are opening more urgent care centers to treat relatively minor health problems.  (We'll call this the good response)

What you can predict will happen next is that doctors' groups and hospitals (and possibly insurance companies in collusion with them) will begin lobbying members of Congress to help create legislation to prevent any further expansion of retail health clinics; and thus prevent the further erosion of doctors' and hospitals established market position. 

And there lies a very large potential problem...the possibility that the government intervenes in the market's natural evolution towards greater competition, lower prices and higher quality...while simultaneously claiming to want to lower prices and improve quality. 

Oh the irony! 

I remain hopeful that our government wouldn't stoop to such shenanigans.  I also remain hopeful that one day Publishers Clearing House will come through with that $10 Million Dollar super prize so I can finally add them to my blocked sender list.

And thus continues the ongoing triumph of hope over experience....