John Edwards' Scary Plans For Corporate America

On Wednesday, the Wall Street Journal published an editorial from ultra-liberal, class-warrior Democratic Presidential candidate John Edwards.

I found the editorial so shockingly socialist and terrifying that I'm reposting it in its entirety, in italics, below. The bolded sections are those which cause me the most fright, and on which I'll comment among the piece's italicized paragraphs.

My Plan to Stop Corporate Abuses
By JOHN EDWARDS

THE WALL STREET JOURNAL

January 2, 2008


The basic bargain of America -- that everyone should have a chance to work hard and build a better future -- is falling apart. Families are working longer hours, but skyrocketing education and health-care costs, the foreclosure crisis, and stagnant incomes have made it harder for working Americans to provide a better future for their children.

Not everyone in America is struggling. Investors on Wall Street took home a record-setting $38 billion in bonuses this past year, even after losing millions in the credit meltdown.
In 1960, the average CEO made 41 times what the average worker made. But in 2005, the average CEO made over 400 times the average worker's salary. The share of corporate profits going to CEO pay has doubled since the 1990s. Meanwhile, the value of the minimum wage has plummeted 30% since 1979.

Investors are not just 'on Wall Street,' and haven't been for some time. The investors of which Edwards writes are your basic trade, municipal and educational workers' union and corporate pension funds.

Next, as the Economist noted this past year in a special section article, corporations are some 4 times larger, by asset size, than they were in the 1960s. Thus, CEO scope of control is at least, on average, 4 times as large. Much of the rise in CEO incomes has to do with supervision of, and accountability for, larger amounts of assets. But CEO tenure has decreased markedly in the forty-plus years since 1960.

Get your facts straight, John-boy.

Don't get me wrong -- it is a good thing that some Americans are doing well. The son of working-class parents, I have been blessed with extraordinary success in my own life and now want for no material thing. The problem is that the successes of the U.S. economy are no longer shared. Forty percent of all economic growth over the past 20 years has gone to the top 1% of American families.

Edwards evidently is unaware that, in America, the bottom segment of income earners is not stagnant. See this post.

The success of the U.S. economy demands that Americans uphold their country's values: fair reward for work and opportunity for all. To meet these goals, America must renew its basic bargain with the middle class and remove the stranglehold that entrenched corporate interests have on Washington.

I don't recall any political "bargain," between any class and our government. In fact, the salient feature of America is that government generally keeps its hands off of the economic life of its citizens. We like it that way. But to my knowledge, our bureaucratic government has made no 'bargain' with me. I won't even see my Social Security contributions again. How's that for a 'bargain,' John?

The first thing America needs to do is to make affordable, high-quality health care a part of the social compact. Not only are health-care costs putting a huge strain on American families and U.S. competitiveness in the global economy, but a system that leaves 47 million Americans without health care is a moral disgrace. As president, universal health care will be my No. 1 domestic priority.

Second, America also needs to adapt retirement savings to the modern work environment. In the past, it was common for people to stay with the same company their entire career, and so it made sense for pensions to be connected to employers. Today, the average American worker will probably hold jobs with multiple companies.

As president, I will create a new universal retirement account requiring every business to automatically enroll its workers in at least one plan: a traditional pension, a 401(k) or an IRA. Workers will be able to choose to have their contributions deducted automatically from their paychecks, and they will be able to carry these accounts with them from job to job.

Is this guy for real? This 'news' is about a decade old. Does anyone even have defined-benefit pension plans anymore? Please tell me this guy is more current than this.

America can't allow fundamentally healthy companies to go into bankruptcy just to avoid keeping their promises to employees, or to emerge from bankruptcy with millions for executives and nothing for workers. As president, I will ensure that corporations honor the pension promises they've made to workers, by giving workers a claim for lost pensions, just like lost wages.

Third, American companies should be run for the benefit of workers and shareholders as well as insiders. Today, too many companies in America are putting far too much of their earnings into excessive CEO and executive pay, when this money could be going to increased worker salaries, better benefits and investments in plants and equipment.

Really? Is John Edwards about to become the economic central-planning czar for the US economy? I thought that failed in Russia a few decades back. Who better to allocate money among competing interests- labor, capital, materials- than the market, via investor purchases and sales of equity shares? What in God's name does John-boy think he's going to do that is so much better than the market? He's so socialist that he makes FDR look like a Reagan Republican conservative.

As president, I will immediately cap untaxed deferred compensation for executives. I will also give shareholders new rights and responsibilities so that they can call shareholder meetings, remove directors who aren't acting responsibly, and have a say on executive pay.

Sorry, John, but the market already provides the ultimate protection- inexpensive buying and selling of equity shares. As I have written on my companion business blog, The Reasoned Sceptic, any minority shareholder who thinks he can, or should affect corporate policies of this nature should have his head examined. Unless he's a hedge fund or private equity investor looking to actually control the firm, he should just buy better-performing companies, and leave the mediocre to badly off ones alone.

Globalization, technology and demographic change have transformed the U.S. economy. Corporations have adapted, but the basic bargain with America's workers has not. We are living in a 21st-century economy, but are asking American workers to compete with a 20th-century set of tools.

How's that again? I don't see corporations struggling to use "a 20th-century set of tools." They seem to be doing fine competitively, where productivity matters. But when it's just labor costs, who really wants to try to compete in a downward wage spiral with Southeast Asia or Africa?

In order to fulfill its obligation to future generations of Americans, the U.S. must restore balance between America's corporations and America's working families. Only then will it be able to guarantee that anyone who is willing to work hard and do the right thing has the opportunity to share in the nation's prosperity.

I truly did not realize anything was out of balance. In fact, many families now own shares of American private enterprise. As to "America's working families," they have the ultimate mobility- within the US, or abroad. If they don't like the jobs on offer, they are more than welcome to seek elsewhere.

Mr. Edwards, a Democrat and a former senator from North Carolina, is running for U.S. president.


In summary, I found this screed to be incredibly small-minded, naive and dangerous. Perhaps that is why the Journal ran it prior to the Iowa caucuses.

Given Edward's second-place finish there, I thought it worth doing my part to circulate his wacky ideas in their entirety, and original form.

If Edwards ever becomes President, I think the economic horror of low growth and high inflation of the Carter years will look like heaven on earth by comparison.

Revisiting The New Deal, Employment & Private Investment

Monday's Wall Street Journal, the last edition of 2007, featured a wonderful editorial by Amity Shlaes entitled "The New Deal Jobs Myth."

She begins her article with these passages,

"Is a public-sector job really as good as a job created in the private sector? I've been wondering about this a lot lately, in part because I just finished a book about the period of the first great American experiment in public job creation, the New Deal. Critics have written that I failed to appreciate the value of New Deal emergency jobs. But the quality of government-paid jobs is also relevant because of the Democratic presidential candidates' interest in that 1930s experiment.

To hear the candidates talk, a repeat of 1930s-scale government job creation is dangerously overdue. John Edwards has proposed that government take the lead in creating types of jobs -- "green collar" and "stepping stone" -- to serve the two goals of protecting the environment and giving lower earners new skills. Dennis Kucinich is calling for a new green version of FDR's Works Progress Administration.

Academics are backing the politicians up. Bruce Katz of the Brookings Institution recently suggested that intelligent planning is the key to success: "smart policies and investments on infrastructure can foster productive growth in our economy, sustainable growth."
Given this Edifice Complex, the actual quality of New Deal spending, job creation and growth are worth a second look. The record is less impressive than the rhetoric implies."

This alone is rather scary. Schlaes documents several Democratic Presidential candidates alluding to the need for government-sourced infrastructure and/or jobs programs. Thus, her focus on whether or not the New Deal efforts were all they are now remembered as being.

I should note that even in my youth, during the mid-1960s, it was often acknowledged that Roosevelt's various New Deal programs didn't pull America out of the Depression- World War II did that. Back in post-Eisenhower America, Democrats were regarded as the party that took our country to war. Seems silly to write that now, but it was true- Wilson, Roosevelt, Truman, Kennedy, Johnson. But, I digress.

Putting her finger on the key aspect which differentiates most public and private sector employment, Schlaes writes,

"What was wrong with those public works jobs? Many created enduring edifices -- New York's Triborough Bridge, for example, the Mountain Theater of Mount Tamalpais State Park outside San Francisco, the Texas Post Office murals, which were funded by Henry Morgenthau's Treasury. But the public jobs did their work inefficiently. That was because the jobs were scripted to serve political ends, not economic ones."

Short term, politically motivated job creation might provide some temporary, albeit inefficient, ways of increasing demand by paying people for 'work.' But it can't, in more than the short term, help but become wasteful of a nation's resources. It's rather like throwing Ricardo's theory of comparative advantage into reverse, and pouring resources into things for all the wrong economic reasons.

But this waste wasn't limited to simply labor resources. Schlaes also points out,

"One could interject that such arguments do not take into account the context -- the paucity of other jobs, the dust storms, the deflations, the homelessness, the incomprehensible real privation of the period. But in the later part of the 1930s, the same model infrastructure projects did their part to prolong that privation. The private sector, desperate, was incredibly productive -- those who did have a job worked hard, just as our grandparents told us. But the government was taking all the air in the room. Utilities are a prime example. In the 1920s electricity was a miracle industry. There was every expectation that growth in utilities might pull the country through hard times in the future.

And the industry might have indeed done that, if the government had not supplanted it. Roosevelt believed in public utilities, not private companies. He created his own highly ambitious infrastructure project -- the Tennessee Valley Authority. The TVA commandeered the utility business in the South, notwithstanding the vehement protests of the private utilities that served that area.

Washington sucked up much of the available capital by selling bonds and collecting taxes to pay for the TVA or municipal power plants in towns. In order to justify their own claim that public utilities were necessary, New Dealers also undermined private utilities directly, through laws -- not only the TVA law but also the infamous Public Utilities Holding Company Act, which legislated many companies out of existence. Other industries saw their work curtailed or pre-empted by government as well.

At many points during the New Deal, net private investment was not merely low, but negative. Companies were using more capital goods than they were investing in.

All this tells us that while some companies were gunning their engines for the moment -- the industrial production -- they had little hope for productivity gains in the years ahead. Business no longer believed in business. Five years into the New Deal, companies across the country were mounting what Roosevelt himself described as a "capital strike.""

This is the socialism for which FDR is justly criticized. He inherently distrusted private enterprise, and granted sweeping powers to public utilities while crowding out the private, investor-owned ones. People in the current era seem to forget how rampantly socialist FDR was considered to be. To illustrate his father's economic conservatism, and the Midwest's distrust of FDR's socialist programs and interference with the market economy, my father has told me many times,

"I was thirteen before I knew Roosevelt's first name wasn't Goddam."

I've written elsewhere in this blog that it's unrealistic to believe that civil servants will ever, on average, be motivated to solve a major economic problem better or more quickly than private enterprise. Further, who among us knows of many intelligent, well-educated people who head for middle management jobs in federal cabinet agencies? I'd never trust career administrators in the federal government to solve economic or social problems better than the private sector.

Yet FDR's failed programs have now become a mis-remembered beacon to today's liberal leaders. Rather than budget for infrastructure projects and let contracts to industry, or allow industry to determine the types of jobs it needs, Kucinich and Edwards are busy planning to have taxpayers fund their own visions of new training programs and public works agencies. The faith that America has placed in its profit-driven, entrepreneurial private sector since World War II would soon be replaced by the American version of Soviet central planning.

Schlaes concludes by writing,

"The relevant points for today are simple. The famous "multiplier effect" of public spending may exist. U.S. cities do indeed need new highways, new buildings and new roads, maybe even from government. But these needs should be weighed against damage that comes when officials create projects and jobs for political reasons.

An emergency such as a Great Depression, a Sept. 11, a Katrina, can serve as a catalyst for an infrastructure project and for job creation too. But the dire moral quality of that emergency does not guarantee that the project undertaken in its name will be more efficient than your standard earmark.

In other words, candidates may want to be careful as they climb onto FDR's shoulders. The New Deal edifice may look solid, but it doesn't form a good basis for the American future."

One wonders how much more FDR could have done, had he used Congress to appropriate funds for his visions, but left industry to organize and implement them.

Let's hope we don't let today's liberal Democratic Presidential candidates attempt to repeat the worst features of FDR's multi-term reign.

Pre-Iowa Presidential Editorials

This weekend, Kim Strassel and Peggy Noonan both had thoughtful, thought-provoking editorials in the Wall Street Journal.

I absolutely loved Strassel's piece on Obama Bim Baden. She nailed him accurately as wanting to bring 'change,' without any explanation of what his changes will be. But when she went through the litany of proposals and positions he has espoused, it's hardly change. More like continuing liberalism with more muscle and less compromise.

In that regard, while unsaid in Strassel's piece, Obama is actually somewhat like Hillary. Don't compromise- just bulldoze anyone who doesn't agree with you.

Noonan, on the other hand, wrote, in my opinion, a mixed column. For some reason, she holds candles for two Democratic Senate has-beens: Chris Dodd and Joe Biden. The latter is an acknowledged plagiarist. The former merely an old, puffed-up, self-impressed windbag who so typifies why Americans inherently distrust most Senators.

But Noonan's overall list of who's reasonable and who is not was not bad. Hillary's not. Most of the leading candidates, otherwise, are. She thinks Obama is, but I'm with Kim Strassel on this one. Neither of the two frontrunners on the Democratic side is reasonable.

I do agree with Noonan on what she fails to call, but describes, as character. She believes the next President will have at least one major, unexpected crisis with which to deal, and will need to galvanize the nation's support. She doesn't believe enough Americans will trust Hillary to give her that support, and I agree.

The more I look at world events- Putin, Bhutto, Iran- the more I believe that insufficient numbers of voters will, in the end, be capable of pulling the lever for either Hillary or Obama. They'll say they will, but they won't.

Meanwhile, I'd be okay with Romney, Giuliani or Thompson. McCain's periodic self-righteousness and ignorant stubbornness on campaign finance has always alarmed me. I simply distrust his sensibilities on many issues. Not his bravery or intent, but his basic common sense and intellect.

Hickabee......God, let's hope this guy is just a flash in the pan. He's shallow, liberal, aimless and rudderless. And another Arkansan.

Well, we'll know what the Iowans think in less than a week.