The gloves are off now. Our President has called those who oppose the current health care bills liars, and of course there is the now-infamous South Carolina congressman who lobbed the accusation at President Obama himself. I thought one was supposed to refrain from such lack of civility, but since it seems to be all the rage, let me give it a try.
In his The Wall Street Journal column this morning, progressive writer Thomas Frank said conservatives are “…ignoring the fact that our current troubles are the consequence of government’s withdrawal from the economy.” Well, Thomas – you lie! Man, that doesfeel good. While I am at it, there have been others who claim that the crisis of the last year was all the government’s fault – I could not find one in particular to pick on this morning – and to all of them I say, “You lie!” Wow, this is fun.
All of this lying reminds me of a quote from Lyndon B. Johnson: “There are plenty of recommendations on how to get out of trouble cheaply and fast. Most of them come down to this: Deny your responsibility.”
This week the G-20, the leaders of the 20 largest economies in the world, will meet in Pittsburgh. They have a solution for the global financial crisis: cap the pay of bankers. For a year they have been pushing the populist notion that this whole crisis was caused by banker greed, and that they (governments) had nothing to do with it. So the simple cure for greed is to cap pay. This fits all of LBJ’s aforementioned criteria: it is cheap, it can be done quickly, and it denies any government responsibility for the crisis.
Unfortunately it won’t actually fix anything, and in fact it will bring on a host of new issues. There is no doubt that pay packages in the financial world can be excessive, but the only people who are actually hurt by that are the owners of these companies who would otherwise be reaping those rewards. Shareholders, not the government, should be policing the pay packages at the firms they own.
The economic truth is more complicated than simple right vs. left, capitalist vs. socialist. The truth is there is plenty of blame to go around. The truth is unless governments around the world, starting with our own, admit their role in this mess, there will be no real solutions. They will add yet another layer of regulation, creating new distortions in the market that will create some future crisis for the next generation to clean up. Let’s just hope the next generation is more honest than our current collection of liars.
Chuck Osborne, CFA
Managing Director
