In A Wall Street World, Washington Finally Delivers

Cash in the pocket of a suit jacket i i
iStockphoto.com
Cash in the pocket of a suit jacket
iStockphoto.com

How much more than the average worker are CEOs really making? Read Lawrence Mishel's insight here.

Sometimes it seems like you just can't win.

Take Obama pay czar Kenneth Feinberg — his job is to cut outlandish salaries and bonuses for companies on government life support. So when he finally got to work yesterday, everyone moaned and complained. The guys who got hit with up to a 90 percent cut in pay say they earned it — and it ain't fair for Feinberg to take it away. Market fundamentalists like The Wall Street Journal argue the government has no business dictating anyone's pay and the czar ought to be fired. With all due respect, these reactions should be discounted.

The editors of The National Review Online discuss why the love of power can be just as dangerous as the love of money.

The surprise is that critics of Wall Street and apostles of financial reform are also kicking Feinberg, claiming his announcement of cuts was just a political smoke screen to obscure the lack of progress and even the backpedaling on financial reform. These voices say pay is a sideshow and should not be substituted for the main event of reform. Further, they claim the cuts were mainly symbolic since they didn't hit many of the main culprits, including the guys with the golden touch at Goldman Sachs, whose bonuses seem to be bigger than ever thanks to Uncle Sam's helping hand last year.

Well, the cuts are certainly symbolic and they're certainly not the main event, but they are critically important symbols that may actually facilitate the eventual success of the main event. Nothing would have been more discouraging to the forces of reform than to have a pay czar who cut no one's pay. Yes, the pay czar might have tried to be a little more awe inspiring, like a real Ivan the Terrible kind of czar. And maybe it's not too late for some of that — there's no reason why the czar can't make more announcements later.

But the main point is that the government has actually said enough is enough, and we're not going to take it anymore. A principle has been established, however imperfectly, that some kinds of pay are beyond the pale and that the paycheck isn't, after all, the most important thing in this society. In an age of greed and rights, the U.S. government has said people have obligations too. That's not a bad thing. Now I, and many others, can tell our kids and grandkids that there is a real society in this country and not just a bunch of grasping individuals demanding their rights and taking all they can get.

Though just a bandage, the good news here is that of all the reform measures, this is the only one that can be done unilaterally by the White House. All the rest depends on the Congress and other independent regulatory agencies. So by demonstrating commitment, the White House may have signaled a resolve that will energize rather than anesthetize the reform efforts.

If that doesn't happen, the public will have to review the pay and job security not only of the pay czar, but also of the president.

Clyde Prestowitz is president of the Economic Strategy Institute and the author most recently of Three Billion New Capitalists — the Great Shift of Wealth and Power to the East. He served as counselor to the secretary of commerce in the Reagan administration.

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