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.