Commentary by Kevin Hassett
Feb. 9 (Bloomberg) -- It was the height of irony. Before the dust had even settled on the grave of Tom Daschle’s nomination, President Barack Obama imposed a $500,000 cap on the salaries of executives who work for firms receiving “extraordinary assistance” from the Troubled Asset Relief Program.
A half-million dollars is hardly enough to pay Daschle’s car-and-driver bill.
Obama’s restriction follows a theme he has been pounding since the election: Greed got us into this mess. “You’ve got corporate executives who are giving themselves million-dollar golden parachutes and leaving workers high and dry,” he said during the campaign. “That’s wrong. It’s an outrage.”
Maybe so, but isn’t it time that we expose politicians to the same scrutiny we are applying to the private sector? If Obama really wants to make the country a better place with a $500,000 salary limit, he should cap the salary that government officials can earn after they leave government service.
To make sure the rule has teeth, the salary limit should be in effect for at least a decade after somebody leaves the government.
Such a sentiment might seem an outrage, but it used to be widely accepted. In his memoir, Harry Truman wrote: “I could never lend myself to any transaction, however respectable, that would commercialize on the prestige and dignity of the office of the presidency.” After leaving the presidency in 1953, he lived on an army pension for $112.56 a month.
No Trumans Today
It’s hard to think of anyone in recent American political life who had Truman’s attitude. Why, even Ronald Reagan himself raked in more than $2 million for a set of speeches in Japan.
But the riches being raked in by today’s politicians put Reagan to shame. They can do so because government has gotten so big that a nod of Uncle Sam in your general direction can be worth billions. People who know how to get Uncle Sam’s attention are priceless.
We learned during Daschle’s confirmation hearings for secretary of the Health and Human Service Department, that his income exceeded $5 million in the two years after he left Congress. Who knows? That might be par for the course for a former senator.
Bill Clinton’s lucrative speaking engagements earned him almost $52 million in the first seven years after leaving office in 2001, according to CNN. At least he was giving an entertaining speech. There are far too many former politicians who exist in a kind of netherworld between the private sector and Washington, quietly raking in riches without performing actions that are visible to the public.
Rahm, Rubin
One could easily fill an encyclopedia with examples from both political parties.
Former Vice President Dick Cheney made millions at Halliburton Co. Current White House Chief of Staff Rahm Emanuel made more than $16 million working for Chicago-based investment bank Wasserstein Perella & Co. (then known as Dresdner Kleinwort Wasserstein) after leaving his post as senior adviser to President Clinton.
The most-famous recent case is Clinton’s former Treasury secretary, Robert Rubin, who made more than $126 million in cash and stock as director and senior counselor of Citigroup Inc., according to the New York Times.
The reward system is so widely accepted that it is practiced even in broad daylight.
In the heyday of Fannie Mae and Freddie Mac, it was commonplace for politicians to be rewarded with lucrative posts there. Franklin Raines, White House budget director in the Clinton administration, became the chief executive officer of Fannie Mae and made more than $91 million during his six-year tenure. Jamie Gorelick, a deputy attorney general in the Clinton administration, moved to Fannie Mae in 1998 and made more than $26 million as vice chairman until 2003.
As bad as the problem has been over the years, it is about to get much worse.
Unprecedented Intervention
Government has introduced itself into the private sector in an unprecedented fashion in the past six months. Government officials are going to make decisions every day that have enormous financial implications for private firms. The stakes have risen to a level we have never seen before.
To put it in perspective, the panel overseeing the bank- bailout program known as TARP last week reported that the U.S. Treasury Department has been shortchanged in its investments by about $78 billion. Treasury purchased assets worth $176 billion for $254 billion.
That $78 billion is a transfer from taxpayers to private individuals. There are probably going to be many more transfers like it in coming months.
Price of Friendship
So I ask you, what would it be worth to a firm to hire a close personal friend of the people administering those government funds? Might it be worth a few hundred million dollars to make sure that when Treasury is paying too much for things, it does so in a manner that favors you instead of someone else?
If there is one thing we have learned in this recent debacle, it is that bad things we can imagine have a nasty habit of happening. Letting Washington bureaucrats hand out billions of dollars is a recipe for disaster.
It is not uncommon for politicians in the former Soviet Union to miraculously become billionaires. If salaries of departing government workers are not capped, the same may end up being true here.
No comments:
Post a Comment