Never Mind the AIG Bonuses: We May Have "Redistributive Change" on an International Scale

I wrote about the obscene practical joke played on American taxpayers by American International Group yesterday. Two more observations -

A Simple Apology and Resignation Would be Sufficient

An Iowa politico made a modest proposal, regarding how AIG executives might deal with the regrettable embarrassment they face.

"...Republican Sen. Charles Grassley of Iowa didn't appear to be joking, however, when he spoke with Cedar Rapids, Iowa, radio station WMT.

" 'I would suggest the first thing that would make me feel a little better toward them [AIG executives] is if they follow the Japanese example and come before the American people and take that deep bow and say, "I am sorry," and then either do one of two things: resign or go commit suicide,' he said.

" 'And in the case of the Japanese, they usually commit suicide.' " (CNN)

I cannot, as a practicing Catholic, suggest that anyone commit suicide. With that proviso, however, I think that Senator Grassley's suggestion has merit.

I think it would be decent of those AIG executives who ran their company into the ground, and rewarded themselves with taxpayer's money, to reimburse the federal government for money wasted on their bonuses. But, an apology and resignation would be sufficient. Providing that they do no more harm to America or the world.

AIG, The Washington Crowd, and, Maybe, Redistributive Change

I don't think that The Wall Street Journal could reasonably be called a scandal sheet. That's why I was a bit disturbed to read this:

"...The politicians also prefer to talk about AIG's latest bonus payments because they deflect attention from Washington's failure to supervise AIG. The Beltway crowd has been selling the story that AIG failed because it operated in a shadowy unregulated world and cleverly exploited gaps among Washington overseers. Said President Obama yesterday, 'This is a corporation that finds itself in financial distress due to recklessness and greed.' That's true, but Washington doesn't want you to know that various arms of government approved, enabled and encouraged AIG's disastrous bet on the U.S. housing market....." (WSJ) (emphasis mine)

And, now that the federal government owns 80% of AIG, I'm very concerned about what money funneled through that company will be used for: and who it will go to.

I suggest, strongly, reading that Wall Street Journal article ("The Real AIG Outrage" (March 17, 2009)). Apparently, "...The U.S. government is now in the business of distributing foreign aid to offshore financiers, laundered through a once-great American company...."

Coming from another source, I might be more skeptical. Reading about what might be the start of "redistributive change" on an international scale - in The Wall Street Journal - I think there's some reason for concern: or at least a high level of interest.

American Money Going Overseas Can Make Sense - But This Looks Sneaky

I think that there are times when it's good policy to send tax dollars overseas: either directly or indirectly. Looking through my Another War-on-Terror Blog should give you an idea of my view of the world, and America's place in it. I'm no isolationist.

However, it looks like there may be something very sneaky going on with the feds and AIG. And, given Obama's views on redistributive change and related topics, I'm very concerned about the federal government quietly acquiring a massive interest in AIG, and the amount of money that's being channeled (the WSJ author wrote "laundered") through AIG.

I sincerely hope there's a nice, reasonable - and acceptable - explanation.

Related posts:

• "AIG, Outrage, Corporations, Unions, and Common Sense"
  (March 16, 2009)
• "The Catholic Church Won't Even Let People Kill Themselves"
  A Catholic Citizen in America (January 28, 2009)
• "Marxism: It Looks So Good on Paper"
  (October 28, 2008)
• "Barack Obama: Lack of 'Redistributive Change' Was Tragedy of Civil Rights Movement"
  (October 28, 2008)
• "Spread the Wealth Around,''Change,' 'Redistributive Change' What's the Big Deal?"
  (October 27, 2008)
• "Am I a Partisan?"
  (October 27, 2008)
• "Joe the Plumber Asked the Wrong Question"
  (October 25, 2008)
• "FBI and Republicans in 'Unholy Alliance' to Stop ACORN and Obama: Of Course! It all Makes Sense Now"
  (October 17, 2008)

News and views:

• "Iowa senator wants public apology from AIG"
  The Associated Press (March 16, 2009)
• "Justice Thomas: Americans don't sacrifice as much"
  The Associated Press (March 16, 2009)
• "Obama tries to stop AIG bonuses: 'How do they justify this outrage?' "
  CNN (March 16, 2009)
• "The Real AIG Outrage"
  The Wall Street Journal (March 17, 2009)

AIG, Outrage, Corporations, Unions, and Common Sense

'Outrage over AIG bonuses' is sizzling on the Web this morning, and for good reason. The American government has given somewhere in the neighborhood of $10,000,000,000 (USD) to American International Group, AKA AIG, to help that corporation out of the mess its executives and managers made.

It looks like some of the executives got a cut of the take, to the tune of $165,000,000 (USD): much of that going to AIG execs. Not that shabby a reward, for running financial giants into the ground.

As owner and operator of a sole proprietorship in America, I've got roughly the same chance of getting a federal bailout, and pocketing around a penny on the dollar, as I do of surviving, unprotected, for an hour, inside a blast furnace.

I don't mind one bit. If I got 'help' like that, there would be so many strings attached, that I'd look like Pinocchio: pre-fairy.

America: A Nation of Law

An op-ed piece this morning opens with a pair of quotes:

" 'We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system.'–Lawrence Summers, chief economic advisor[!] to President Barack Obama

" 'Perhaps you [the government] can explain to all of us why a UAW worker earning $29 an hour must give back wages and benefits to keep their company alive, while the architects of the biggest financial disaster in history get to keep their gold plated contracts.'–Peter Morici, economist, University of Maryland" (EMac's Stock Watch)

Glenn Greenwald's blog on Salon.com also discusses the AIG bailout, and the auto workers' union. Mostly AIG.

What President Obama's economic adviser said is true: America is a nation of law. I think that's true. It's also true that there's a lot of legal wrangling over exactly what the terms of a contract mean - but that's another issue.

Having laws, and being expected to follow them, is, I think, a good thing. Given the attitude I have toward a massively powerful federal government micro-managing private-sector matters, I don't mind having legal barriers between the feds and corporation execs.

UAW and AIG: Class Struggle Between Proletariat and Bourgeoisie? Reality Check, Please!

What the Maryland professor said got me curious, so I looked up American wages on the BLS website ("Wages by Area and Occupation," Bureau of Labor Statistics). I didn't find an exact match for "AW worker earning $29 an hour" - but I got a few that are close.

Turns out, as of May of 2007, this is what Americans were getting paid, on average, in these occupations:¹

• "Production Occupations" overall
  • $15.05 an hour
  • $31,310 yearly
• "Aircraft Structure, Surfaces, Rigging, and Systems Assemblers"
  • $21.24 an hour
  • $44,180 yearly
• "First-Line Supervisors/Managers of Production and Operating Workers"
  • $24.88 an hour
  • $51,740 a year
• "Numerical Tool and Process Control Programmers"
  • $21.54 an hour
  • $44,800 yearly
• "Tool and Die Makers"
  • $22.36 an hour
  • $46,520 yearly

So, why the tone of righteous indignation I thought I noticed in the Maryland professor's comparison of UAW workers and "the architects of the biggest financial disaster in history"?

AIG executives probably don't, as a rule, have to get by on the $44,800 a year that your average Numerical Tool and Process Control Programmer makes.

Neither do college professors, for that matter. Americans with "Education, Training, and Library Occupations" get an average $22.41 hourly wage. That may help explain why professors, who are to some extent involved in education, are sometimes perceived as relatively poor. Looking a little deeper into the BLS site, I found that college professors don't have "hourly wage" listed. Their employment is seasonal, you see. They use their 'time off' to study, presumably. Besides, their pay isn't calculated that way.

I did a little figuring, from ten post-secondary teaching occupations listed by the BLS. College professors get by on a paltry $75,080 a year, on average.

• Ten listed postsecondary teaching occupations average
  • $75,080 a year
• "Mathematical Science Teachers, Postsecondary"
  • $65,450 a year
• "Engineering Teachers, Postsecondary"
  • $85,260

I'm not complaining about what the professors make: what they do is a specialized job, requires a fair amount of training, and is demanding. If that's the market value for their set of skills, no problem.

I think that what your typical college professor makes may affect his or her perceptions of what a 'typical' or 'reasonable' wage is. It looks like professors make half again as much a year as your run-of-the-mill Numerical Tool and Process Control Programmers. More than that, actually. Or, coming at it the other way, the N.T.P.C. Programmers only make in the neighborhood of 2/3 what a prof does.

No wonder the Maryland professor regards $29 an hour as a comparative pittance.

Having grown up within a block of a college campus, and spending decades in or near America's academia, I've heard quite a bit about the class struggle between the proletariat and bourgeoisie. A century and more ago, that was an important aspect of Western civilization's evolution.

But today, the UAW isn't struggling against plutocratic oppressors of the Victorian Age.

This isn't the 19th century anymore.

We're in the 21st century and, if anything, the UAW is now part of the entrenched system that labor unions struggled against.

Big Three Automakers, AIG, Bailouts, and Pavlov

I'm not as hard-hearted and callous as this is going to sound. Letting the Big Three automakers fail might be a good idea. Ibid for AIG and all.

The Humanity! The Humanity!

Yes, I know that if GM, Chrysler, and Ford go the way of Owens Magnetic, quite a lot of UAW workers might be out of a job. But I don't think that Americans will stop driving - and buying - cars.

As I wrote last year, "I have trouble believing, though, that nobody of the several-hundred-million people who live in this country doesn't want to open an automotive design and assembly company, and have the brains and background to do it.

"It's been a long time since a new automotive company has had a chance to get started, with three 800-pound gorillas sitting on the American car market...." (December 12, 2009)

The start-ups might not be able to provide the pay and perks that UAW members have become accustomed to, and they might have to learn new skills. Some people may find it hard to change decades-old habits. But my guess is that union workers can learn.

Besides, the UAW and others in the established order will have to change their ways anyway. The Big Three are in the mess they're in because their leadership hasn't een dealing with reality.

If the existing Big Three change, union workers will have to adjust - along with everyone else. (I'm getting to the twits at the top: be patient.)

If the existing Big Three don't change their ways, and the rest of us keep bankrolling their incompetence, taxes for a steady stream of bailouts will eventually clean out Americans who do know how to be productive. Then, after what's left of the economy can't take the strain of whatever shenanigans the feds pull to prop up the Big Three, GMC, Ford, and Chrysler will collapse.

And union workers will have to adjust. Only by then, the adjustment will be a lot harder. There won't be as many solvent businesses around to hire them: you get the idea.

Pavlov's Incredible Drooling Dog and AIG Executives

You remember Pavlov's experiment, where he learned about classical conditioning.

The parallel between Pavlov's dog and AIG executives isn't exact: the executives walk on two feet, and haven't learned to drool at the sound of a tuning fork. As far as I know.

However, they have been rewarded for behavior that isn't doing AIG any good. And, particularly since Americans are now bankrolling the American International Group debacle, the rest of us aren't exactly benefiting, either.

I have nothing against a company giving bonuses for performance. In fact, that application of behavior modification makes a great deal of sense.

If, I repeat, if bonuses are clearly and unequivocally linked to desirable behavior.

Barney Frank: "Disgusted" by AIG Bonsues

I don't agree with Barney Frank very often, but I'm also "disgusted" by the way AIG seems to be rewarding incompetent executives: with money that came (in very small part) from me.

Today's Boston Globe had a few words on the subject, including: "...Frank, a Massachusetts Democrat who is chairman of the House Financial Services Committee, suggested that if the federal government, which now owns an 80 percent stake in the company, can't rescind the bonuses, it could force some dismissals.

" 'These people may have a right to their bonuses. They don't have a right to their jobs forever,' Frank said on NBC's 'Today' show...." (Boston Globe)

There's something to be disturbed about in that Boston Globe piece. My guess is that you caught it, too.

That's right: The federal government now owns 80% of American International Group.

The state owning and controlling major businesses? We've gone through this before. It didn't end well then: I'm hoping we get out of the current mess in better shape than Russia and Germany did. ²

Related posts:

• "Govenment Bailouts of American Automakers, Financial Firms: Feels Good, But - - -"
  (March 9, 2009)
• "Bank Bailout Scandal? Maybe - But Think Before You Decide"
  (December 22, 2008)
• "The Town's Hardware Industry: A Parable"
  (December 22, 2008)
• "Bank Bailouts, Bloated Bonuses, and Common Sense"
  (December 21, 2008)
• "So Big Three Collapse: Is That a Problem?"
  (December 12, 2008)
• "Doctors, Terrorists, and the Proletariat: What's a Person to Think?"
  Another War-on-Terror Blog (July 3, 2007)

News and views:

• "Frank disgusted by AIG bonuses"
  The Boston Globe (March 16, 2009)
• "Monday's blue mood: AIG outrage"
  Front Row Washington Reuters Blog (March 16, 2009)
• "Lawmakers Target AIG Over Executive Bonuses"
  FOXNews (March 16, 2009)
• "Bail Out AIG’s Workers, But Not GM’s?"
  EMac's Stock Watch, FOXNews (March 16, 2009)
• "The sanctity of AIG's contracts"
  Glenn Greenwald Salon.com (March 16, 2009)

---

¹ The numbers are BLS mean, or average, hourly wages.

You probably know this already, but:

• Median in this context means "the value below which 50% of the cases fall"
• Mean means "an average of n numbers computed by adding some function of the numbers and dividing by some function of n"
  (Princeton's WordNet)

² I am not responsible for, nor do I necessarily agree with, content at the other end of links. The "Russia" and "Germany" links are to documents which discuss what I think are undesirable aspects of state capitalism in Germany and Russia. I most certainly do not think that regulation is a panacea.

'Nuf said.

President Barack Obama: Interesting Times for Small Business

America's 2008 presidential election didn't turn out the way I'd hoped.

Barack Obama won the popular vote by a comfortable (for him) percentage, and walked away with the electoral college. Barring catastrophe, he'll be president for the next four years. Maybe eight.

I can't say that I'm looking forward to that, but this is no time for hand-wringing.

Small Business and the Obama Presidency

I'm far enough below Obama's various 'tax-em' income thresholds to be (relatively) safe. Inheritance tax, though, will probably be another issue.

Everyone who's trying to run a business can, I think, expect:

• More regulations, sensible and otherwise
• More
  • Taxes
  • Fees
  • Forms to fill out

And, since it looks like employers will have their taxes and regulatory expenses increased, they'll have to lay off workers, or cut wages - and aren't all that likely to hire new people.

Which means that ordinary folks won't be spending as much - even if Uncle Sam throws out the occasional bonus for breathing.

And, enterprises won't be buying each others' goods and services. Which means more cutbacks.

But, you know this already.

Adjusting to President Obama's America

I said 'no hand-wringing,' and meant it. The fact is, the next four years aren't likely to be boom times.

Some businesses may do well under the new administration. Obama's taste for huge outdoor events may create a sort of micro-boom for caterers and related businesses. At least, in the Washington, D.C., area.

And there may be a growing demand for services and consultants who can give practical advice for how to deal with regulatory changes du jure.

My business, so far, has been entirely online. That's good news, in a way, since I don't have the worries that brick-and-mortar businesses will have.

On the other hand, I'm an online publisher. If the Obama campaign's blacklisting of a Florida television station and removing non-adulatory reporters from the campaign plane are a sign of things to come, we're in for exciting times.

I was on college campuses in the seventies and eighties, and experienced political correctness. As an outsider. Another era of having to keep up with the latest shibboleths won't be fun, but I'd manage. And, I'm keeping a weather eye for changes in what 'freedom of expression' means.

Paranoid? Hardly. But, having experienced the tail-end of the conformist fifties, and a later decade's tender sensibilities, I have some idea of how far human silliness can go.

Barack Obama as President: it Won't be Boring

Ten years ago, Minnesota elected Jesse "The Governor" Ventura as Governor. We had a colorful four years, while he was in office. Barack Obama isn't Jesse Ventura, but there are parallels: "Barack Obama: America's Jesse "The Governor" Ventura? "> (Another War-on-Terror Blog ((November 5, 2008)).



Previous posts on this topic:

• "Obama Campaign Boots Reporters: This Should Concern You "
  (October 31, 2008)
• "Marxism: It Looks So Good on Paper"
  (October 28, 2008)
• "Florida: Hotbed of Hate or Land of Opportunity?"
  (October 28, 2008)
• "Barack Obama: Lack of "Redistributive Change" Was Tragedy of Civil Rights Movement"
  (October 27, 2008)
• " 'Spread the Wealth Around,' 'Change,' 'Redistributive Change' What's the Big Deal? "
  (October 27, 2008)
• "Am I a Partisan?"
  (October 27, 2008)
• "Biden Interview about Barack Obama Campaign: ACORN, Redistrubion of Wealth, Marxism, and Other Impertinent Questions "
  (October 26, 2008)
• "Joe the Plumber Asked the Wrong Question "
  (October 25, 2008)
• "FBI and Republicans in "Unholy Alliance" to Stop ACORN and Obama: Of Course! It all Makes Sense Now "
  (October 17, 2008)
• " 'Joe the Plumber' Wurzelbacher: American Taxpayer, Entrepreneur, and Voice of Reason in 2008 Election "
  (October 16, 2008)