I was watching Law and Order tonight, which was doing its liberal best to slander the CEO's who "lived it up" and "robbed their investors", when a thought occurred to me. Yes, some CEOs probably did misallocate funds, some firms overspent on management.I think this has been overplayed, as companies need to pay well to get top notch management, and during good times, that pay needs to be even higher, but still, there was probably a bit more pay and a few more perks than were really needed. However, the firms were still run by shareholders, who knew from reports (if they bothered to read them) exactly what was being spent, yet they did not turn out the boards. Why? Because during good times the expenditures seemed right, and they were benefiting as well.

What we don't hear about, especially from the self-righteous politicians denouncing this "greed" is about a much worse abuse.

I am talking about Washington.

Think about your life. You have good times and bad times. If you are prudent, during the good times you put away a little extra sot hat during the bad times you don't have to tighten your belt so much. But, even if you don't, when bad times hit, you don't keep spending as if the good times were continuing. You scale back, cut your expenditures, and live within your means.

But Washington, unlike you, and even unlike those CEOs, doesn't do that. During good times not only don't they put away extra against a rainy day, they actually increase their spending. Even worse, they make plans based upon the good times continuing forever, committing themselves to this higher spending for eternity. And, when bad times come, as they always do, they don't cut back, and they have no savings, instead they just tax us more, or "borrow", which usually means monetary inflation, essentially taxing those who save or invest by causing their dollars to depreciate.

So, while you hear politicians denounce CEOs and their "greed", ask yourself this, who is suffering because of those CEOs? The same investors those CEOs made richer earlier, and who did nothing to reign in those CEOs when they making money. Yes, some workers also lost their jobs, but how many jobs were also created by those CEOs during good times? And when the market collapsed, how many jobs would ahve been lost in any case, even if CEOs had lived like monks? In the end, the CEOs only hurt the same people they helped earlier.

But Washington is different. They aren't just hurting those who have investments with them, they aren't hurting those they made rich. And no one has the option of getting out of the investment. Washington is holding a gun to all of our heads threatening us with fines and jail unless we pony up and let them continue their wanton spending spree, acting as if the good times never ended.

And I have to ask: How can these people complain with a straight face about the "greed" of Wall Street? At least private enterprise produces something of value. Washington takes and takes and produces almost nothing. Which sounds like greed to you?

POSTSCRIPT

Then there is the bizarre theory that somehow Wall Street was getting rich by making bad mortgages, to people who wouldn't repay, then repossessing overvalued houses in bad neighborhoods which no one would buy. At least that is the only explanation I can imagine for the claim "Wall Street greed" caused our mortgage crisis. I have argued before that the mortgage and housing bubbles were only symptoms of the monetary inflation Washington and the Fed inflicted upon us, but even if we imagine the mortgage and housing crises exist as independent events, there is no way a profit driven company would make such bad loans. If they would, there would have been no need for Fannie, Freddie or the Community Reinvestment Act. You don't pas laws to make people do what they would do anyway. No, they were forced to act against their interests by Washington, and it is Washington which is to blame for the collapse, not any CEOs or investors.

POSTSCRIPT II

A lot of the anti-CEO rhetoric also rests upon stupid populist arguments that seem to suggest management just takes money and produces nothing of value. In short, that CEOs are paid millions but don't return any value. That is absurd, and supported by nothing but envy. However, if ti were true,t hen why do we have generals in the military? Or managers for stores and restaurants? For that matter, why should children listen to parents? If organizing, coordinating and managing has no value at the CEO level, then it makes no difference at any level. And if we accept that managing at one level is valuable, then why would it not be valuable at the CEO level?

The problem is akin to those who whine about why actors and baseball players get so much money. The reason is simple. An actor or ball player may only provide an individual with $1 of value each year, but fit here are 10,000,000 such people, that is one big paycheck. Similarly, if a CEO can manage a massive firm, even if he only provides a fraction of a cent value per dollar of revenue, he makes a lot fo money for the firm. (There are other factors, such as the fact that those with experience managing multi-million employee firms is a small pool, so proven CEOs are always in short supply, and thus bid up in the market.)

But the fact that these simple truths elude so many people, and that it is easy to stir up resentment against those who earn millions for doing work the vast majority do not understand make sit easy to stir up resentment against CEOs.

POSTSCRIPT III

The following essays deal with CEO salary caps specifically:

A Really Foolish Idea
Greed
Greed Part 2
A Little More On CEO Salaries
Pointless or Destructive
Another Bad Idea
Crippling Business
AIG Absurdities
Hurrah For Linda Chavez!
Elevating Mob Rule
AIG Nonsense
Very Good Article

And these deal with inflation, the Community reinvestment act and related economic matters, such as bailout plans:

A Reason to be Afraid
Michael Barone Gets His Economics Wrong
The Problem With Economic Debate
A Question of Perception
Defying Nature
Thomas Sowell Imitates Me
A Sober Look at the Economy
Borrowing Versus Taxing
My How Things Change
Alan Greenspan's Hubris
AIG Absurdities
Planning For Imperfection
Weimar Republic Here We Come!
Elevating Mob Rule
How Does This Work?
AIG Nonsense
Inflation and Uncertainty
Very Good Article
Geithner's Problem
Derivatives and Other Investments
Do I Need to Comment?
Something to Keep You Awake
How AIG and GM Ruined Any Chance at a Less Intrusive Bailout
The Problem With The Auto "Bailout"
When You're Right, You're Right
A Thought on the Clinton Surpluses
At Last!
WSJ Misses the Mark AGAIN
Place Blame Fairly, Regardless of Party
"Good People"
Subsidizing Irresponsibility and Poor Planning
He Said It At Last!
Too Big To Fail
Why Gold?
Proof Keynes (and Krugman) Are Insane
Shopaholic Government
All the News That's Fit To Invent
Treasury May Be Doing the Right Thing
Signs the Fed Is Not Getting It Right

Actually, that is the list of posts since 03/06/2009. My earlier posts are listed at the end of "A Reason to be Afraid", I omitted them as they made the list far too long.