Capping CEO Compensation vs Progressive Taxation

They're at it again. They're talking about birdies instead of fundamental problems - even if the birdie is part of the fundamental problem.

This morning it appears that Congress will support a package of $700 Billion in aid to failing Wall Street and Main Street banking firms. However, before Congress votes a number of Members of the House of Representatives must get up and speak before voting since they're up for re-election. And since this is the height of silly season in the US, speak they will!

And who better to kick around than CEO's? The best, most hypocritical of these speeches come from House Republicans. First, let me say that I do not disagree with a policy that CEOs of those firms that receive Federal assistance should have caps on their remuneration packages. Given that the entire economy is on the line, largely because of their greed, it is reasonable to expect that the leader of a firm needing assistance shouldn't get anything extra.

But let's back up a moment here. Remember that most true conservatives will argue for user pay in most instances and that taxes should reflect as closely as possible the consumption of services, not to ensure the equitable provision of a service regardless of income, i.e., that taxes should be based on the cost imposed on society by the individual and not their income. The rich don't cost anymore to serve so they shouldn't pay more in taxes the belief goes. Flat taxes are the conservative ideal. From there it is a gray area - an attempt to limit the mix and balance of the share of individual proportions of the entire tax bill.

It is also the partner of the belief that high taxes reduce the incentive to innovate, work hard and try to get ahead. I think that is a fundamentally flawed view - there are leaders and followers, achievers and under-achievers regardless of the amount of taxation. Conservatives want government to be small, off our backs (though oddly, religious conservatives want to be in your bedroom) and for taxes to be constantly reduced regardless of other factors. And market intervention is to be avoided as much as possible.

But, it appears that deregulation of the financial services sector has resulted in massive over-speculation in the housing market, bad, risky and predatory loan practices and the bundling of mortgages into funds that have eliminated many ties between the investment and the asset. In other words, some of the mortgages are totally illiquid since there is no direct tie to an actual property. 100's of mortgages were bound together as packaged investments and now that the housing market has collapsed due to a slowing of the economy, over-valuation of houses and over-borrowing by consumers, well, there's about $700 Billion of artificial value that needs to be bought. That is why even the experts don't know the value of the assets.

So now it is crazy election time. Rather than advocating for higher taxes on the wealthiest Americans - after all, if John McCain thinks that those earning over $500,000 a year aren't rich, then raise it to $1 million per year or whatever level you believe is wealthy and crank their taxes. Then you wouldn't have to drive further firms from Wall Street to London, further reducing the economic and commercial influence of America. What many Americans fail to see is that many firms have already left the NYSE because of the possible prosecution of CEO's for accounting errors. It's my belief that in their effort to recover their political careers after ENRON and Worldcom, Politicians passed wrong-headed legislation that went too far and after the wrong things. By all means, clean up malfeasance but go after the crimes, not the errors. Perhaps one of the flaws with the Enron business was the significant reliance on private power companies in California and the concession agreements they had with the State?

If the Federal Government taxed the hell out of Golden Handshakes - be it from stock, options or dollars, then they really needn't worry about the size of these packages. In fact, the bigger the better. To the best of my knowledge, a CEO's compensation is determined by a Board of Directors, appointed by Shareholders who own stock and meet on an annual basis to make major decisions. These are the people to whom the CEO is responsible and accountable. CEO compensation packages and the details of their contracts are their problem! Tax Corporate earnings and CEO compensation packages and let private firms determine market value for the services of CEOs!

I cannot believe that in all this din, no one is talking about the hypocrisy. Obama should be saying - 40 percent of a $75 million dollar CEO compensation package is $30 Million; A lot of money. Why does John McCain not want the CEO to pay those taxes? Instead, my opponent would rather show-boat and suggest doing something that he knows we cannot legally do and that is a far more interventionist, socialist, liberal policy than anything I'd ever suggest; Capping private sector wages. He opposes a minimum wage and high taxes but wants to cap incomes? Who is this John McCain? Who are these conservatives?

If your firm gets a bail-out or declares bankruptcy, you shouldn't get a 'golden handshake.' If you leave a firm at any other time - congratulations, good work, enjoy your wealth. Now gimme those taxes!

It's these kinds of debates that really make me think we have little hope to solve the larger problems that we face, be it climate change or pandemics or the looming energy crisis. We get so caught up in these petty issues that we fail to see the trees for the forest.