Detailed Abstractions

This morning, news outlets everywhere carried recent news out of the Treasury Department.  The Pay Czar, who is certainly living up to the moniker Czar, announced today (WallStreetJournal):

The U.S. pay czar will cut in half the average compensation for 175 employees at firms receiving large sums of government aid, with the vast majority of salaries coming in under $500,000, according to people familiar with the government’s plans.

As expected, the biggest cut will be to salaries, which will drop by 90% on average. Kenneth Feinberg, the Treasury Department’s special master for compensation, also intends to demand a host of corporate governance changes at those firms….

Even without bothering with the fact that the government is not in any position to understand what kind of compensation any single employee should have, this is still a radical and arbitrary move that if continued can work to destabilize the economy.

Beyond that, this decision is an anathema to a free society breaking not only the contract rights of ordinary citizens, but also violating all individuals by pushing a blatant ex  post facto punishment.

In a free society, within reason, individuals should be able to contract for any reason they want.  In this case, you have employees who have privately contracted with their employers for certain remuneration based upon their perceived worth to the company.

I say perceived work, because obviously not all hiring decisions work out for the company even if the employee does very well at their job.  Personality conflicts, culture conflicts, and even performance problems are some of the reasons why a new hire might not work out as expected.  Unless specifically stated in the employment contract, even in these cases the employer’s general resource is firing, not taking back pay.

Adding to this is the simple, real, true fact that this is by its very nature an ex post facto punishment for perceived mismanagement.  It has been a legal tradition for centuries, a that passing laws, which retroactively punish people, is against a free in democratic society.

In fact it’s in the US Constitution and universally recognized by a number of treaties including Universal Declaration of Human Rights and American Declaration of the Rights and Duties of Man (from Wiki):

…no person be held guilty of any criminal law that did not exist at the time of offence nor suffer any penalty heavier than what existed at the time of offense. It does however permit application of either domestic or international law….

To be fair, there are some uses for ex post facto laws which have been recognized by our supreme court including allowing for Congress to grant administrative agencies the ability to do just this thing.  So legally speaking, this might be ok, however to anyone who proposes to value freedom, it should be obvious that even allowing administrative agencies this power was a massive failure of all branches of the government.  They are supposed to protect our freedoms, not remove them one at a time.

Either way – it’s intuitive that both contract rights & ex post facto laws are required for a free society.  If the government can interfere at will in private contracts and retroactively punish you for perceived wrongdoings, you have no ability to make relevant decisions for your life as you have no ability to be secure that those decisions will continue to hold true.

This insecurity is what creates instability in most third world countries today.  This lack of basic economic & legal foundation is what continues to plague most of the planet and yet we seem to be moving on the same path.

A week ago or so, a Democratic non-profit held a focus group of GOP members & Independents (here).  Among other interesting things they found, they noted how the GOP members opposed the President because they felt he was attempting to fundamentally move away from our founding principles.

They went further to note how this differed from Independents “underscoring the extreme disconnect of the conservative Republican base voters”.

I will say this move is absolute proof that the GOP members have it right.  If the administration allows this travesty, it is without a doubt a complete move away from not only our founding principles, but away from freedom in general.

With the state of Missouri’s recent fiscal problems and a 9.4% unemployment rate, the state worker’s union has decided now is the time to act.

Questions for the unions:  Is it time to cut back?  Become more lean?  Follow the rest of private industry and cut back as revenue growth loses momentum?

Union’s answer:  Surely ye jest!  We’re the union & the time is ripe for a pay raise!

That’s correct.  As the entire state population spends less money to try to tread water in these tight times, the unions apparently believe they are in prime position to negotiate:

…The union has proposed a 6 percent annual pay raise for the next three years and a “fair share” fee for nonunion members who are covered by union-negotiated contracts. The negations are over a contract for patient care support workers that expired in June and one for craft and maintenance employees that expired in December.

But wait!  Ask them nicely and they’ll tell you that they only have the best of intentions:

Curt Ostrander, the union’s chief negotiator, told The Associated Press that the union’s priority is protect state workers, address staff shortages and help people do their jobs better. He described discussions with the state thus far as “cooperative,” and said the two sides are trying to find ways to be more efficient to save money and solve problems.

“Our top priorities are to provide a contract that gives workers the necessary protection in order for them to perform their jobs in a safe, effective manner and to provide state services,” Ostrander said….

For those MBA’s out there – please note the very sound logic incorporated in “address staff shortages and become more efficient to save money” while simultaneously asking for a 6% raise for the next 3 years during a recession.

The audacity it takes to ask the tax payers of this state to pony up 6% annual raises, while many in the state can’t or won’t get a raise at all this year, is pompous and arrogant.

This combined with them selling the money grab as something that will reduce costs, while increasing staff, is completely disingenuous.

To be fair, this is an opening gambit and it’s not likely they’ll get everything (though the governor is pro-union), but if we continue to allow our elected leaders and unelected leaders (read: special interests) to operate within side the quiet world of doublespeak without so much as a whimper of an objection, then we surely are going to get exactly what we deserve.

Read all about government wages versus free market wages in The Great Recession here

This past Friday, the 25th of June, Democrats, with 8 Republicans in the House have passed sweeping environmental regulation known as Cap and Trade.

Democrats narrowly passed historic climate and energy legislation Friday evening that would transform the country’s economy and industrial landscape.

But the all-hands-on-deck effort to protect politically vulnerable Democrats by corralling the minimum number of votes to pass the bill, 219-212, proves that there are limits to President Barack Obama’s ability to use his popularity to push through his legislative agenda. Forty-four Democrats voted against the bill, while just eight Republicans crossed the aisle to back it…

Despite the numerous problems with the bill and still open questions remaining as to what the full financial impact will be on average consumers, Nobel prize winning economist, Paul Krugman is full of praise (here):

So the House passed the Waxman-Markey climate-change bill. In political terms, it was a remarkable achievement.

Which is perfectly fine.  I honestly tend to expect more out of an economist, like asking questions about cost versus benefits and the like, but I’ve gotten use to Mr. Krugman using his very large bully pulpit for his politics, and not economic principles.

As is his trademark for completely disregarding anything that fails to comport with his world view, he moved from praise directly into false logic:

But 212 representatives voted no. A handful of these no votes came from representatives who considered the bill too weak, but most rejected the bill because they rejected the whole notion that we have to do something about greenhouse gases.

And as I watched the deniers make their arguments, I couldn’t help thinking that I was watching a form of treason — treason against the planet.

So from the very beginning, he places everyone into two basic camps – those who voted for the legislation and those who are anti-science, treasonous bastards, how don’t understand the fundamental science behind climate change.

Instead of acknowledging the well known fact that many opponents of this legislation are not global warming deniers, he presents a false dichotomy in which there are only two sides – his side and those that don’t believe in global warming.

From this basic setup, his article flows smoothly as he defends the science behind global warming all the while pretending the strawman he is busy burning exists in real life.

As usual, outside of his partisan world, the issue is not nearly as cut and dry.  Many of the best argued positions come from people opposed to this bill have absolutely nothing to do with the science of global warming at all.  The generally tread a few main points:

1. What are the true costs of the bill to individual consumers? This question is almost impossible to ask as 300 additional pages were added to the 1000 page bill just a couple of hours before a forced vote.  None of Congress had time to read the additions prior to voting.
2. If we can detail a good cost estimate, do we fully know what benefits to expect in order to balance costs with benefits?
3. & lastly, the politics of the bill are being setup for corruption.  Instead of opening an exchange where the initial carbon offsets can be purchased through a free market system, the government will be handing out those directly to business.  They will get these carbon credits free of charge and be able to resell them on the market once that happens.  Allowing congress the ability to decide who gets free money is a system setup for corruption.

Critiques :Reason, Cato.org, and just a lot of additional BS on politics of the entire thing

Of course Mr. Krugman should know and likely does know exactly what he’s doing.  He frames the debate as a false dichotomy, only allowing two choices, then pretends to make one choice look completely stupid by comparison through the ceremonial burning of the strawman he invented.

Not terribly surprising from a columnist who was arguing in 2004 that the economy needed a housing bubble to get us moving forward again, only to completely reverse course and pretend he never did any such thing after the collapse of that market (here).

Is it really any wonder why the self proclaimed 4th branch of the government is trusted less and less everyday?