You remember the 1970s, don’t you? Nixon, Ford, and Carter? Disco and pet rocks? For some strange reason, some people look with nostalgia on those times. Barney Frank (D-Fannie Mae) must be one of them, since he wants to bring back wage controls:
…in a little-noticed move, the House Financial Services Committee, led by chairman Barney Frank, has approved a measure that would, in some key ways, go beyond the most draconian features of the original AIG bill. The new legislation, the "Pay for Performance Act of 2009," would impose government controls on the pay of all employees — not just top executives — of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.
The purpose of the legislation is to "prohibit unreasonable and excessive compensation and compensation not based on performance standards," according to the bill’s language. That includes regular pay, bonuses — everything — paid to employees of companies in whom the government has a capital stake, including those that have received funds through the Troubled Assets Relief Program, or TARP, as well as Fannie Mae and Freddie Mac.
The measure is not limited just to those firms that received the largest sums of money, or just to the top 25 or 50 executives of those companies. It applies to all employees of all companies involved, for as long as the government is invested. And it would not only apply going forward, but also retroactively to existing contracts and pay arrangements of institutions that have already received funds.
In addition, the bill gives Geithner the authority to decide what pay is "unreasonable" or "excessive." And it directs the Treasury Department to come up with a method to evaluate "the performance of the individual executive or employee to whom the payment relates."
The bill passed through the committee on a party-line vote (How will Blue Dog Democrats on the committee explain this to their constituents?), and there had better be no defectors among House Republicans during the floor vote. Governments have tried price controls (and wages are the price of labor) since the time of Emperor Diocletian, and they have never worked, only hiding inflation, not eliminating it. And with the US government now following a borrow-and-spend policy guaranteed to ramp up inflation, this House bill promises us the worst of both worlds: government control over wages while the real cost of goods and services spirals out of reach.
The audacity of the government’s grab for power over the economy is breathtaking. Far beyond any reasonable measure to stimulate the economy or cure the banking crisis, this bill and the effective takeovers of AIG, General Motors, and Chrysler are just the first stages in a radical transformation of our nation from a free-market republic with a government of limited powers as defined by the Constitution to social-democratic and statist regime that manages everything — including your car’s warranty. It makes a mockery of the law of contracts –one of the foundations of our
banana republic– and further crushes any reason to invest in American businesses or America itself.
This bill will likely pass the House, but the Republicans in the Senate had better fight it tooth and nail if they want to have any hope of regaining their reputation as the party of free markets and limited government.
For now, however, it’s back to the 70s, folks! Break out those leisure suits!
LINKS: Sister Toldjah