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Reich Shows Why Hillary Clinton Must Not Be President

The September 10 issue of BusinessWeek includes an interview with Robert Reich, the Labor Secretary under President Clinton. Economics Editor Peter Coy interviewed the Berkeley Professor for Public Policy, and posted excerpts in a one-page article on page 86, in the IdeasOutsideShot section. However inadvertently, Dr. Reich's comments provide evidence that another Clinton Administration would be bad for America.

Coy admiringly compared Reich to Milton Friedman in places, but the comparison does not hold up to inspection. Reich admits that "Capitalism has proven itself the most successful system ever designed for allocating resources to where they're most needed". But Reich is unable to let go of the Socialist ideals he used to guide his decisions under Bill Clinton, and they are obvious in two key claims made by Reich in the interview. First, Reich bemoans executive compensation, claming "CEO pay diverges mammothly from the pay of average workers". Reich also claims that job security is far too unstable in modern times, concluding that government needs to "police the border between capitalism and democracy". The statements, as I see them, are not only dishonest on their face, but are wholly incompatible with American ideals.

Let's start with that gripe about CEO pay. The first question to ask, is whether that claim is really true. We sure hear it a lot, how the average CEO makes a ton of money while the regular guy gets shafted. To find out, I checked with the government's Bureau of Labor Statistics (BLS) on how many CEOs there are, and what they are paid. Using the Standard Occupational Codes (SOC), I found that there are 299,520 people coded as 11-1011, or "Chief Executives". Sounds like a lot, until you remember that there are 300 million Americans, and the size of these businesses vary quite a bit. Anyway, those CEOs average an annual salary of $144,600, nice but not especially awesome, given the hours, responsibility, and personal risk they assume with the job. The BLS also says the Mean Annual salary for all occupations is $39,190, so the average CEO pulls down about 3.7 times what the average worker makes. And since the average CEO is either the outright owner of his company, or proved his worth to get the job through a combination of education and experience and personal ability, the range is not - despite the hype - quite as Dr. Reich claims.

- continued -

So where do Reich and a lot of other screaming meanies get the idea that CEOs are, in general, overpaid? It comes down to a very selective list; compensation for CEOs of the S&P's top 500 public corporations is around $10.2 million a year as of 2006, which does work out to around 260 times what the average worker makes. Of course, the same factors of experience and proven results make it hard to condemn these leaders with any validity, so what Liberals like Reich do, is to smear the whole on no basis other than blaming them for success, skewing the overall picture by focusing only on the few who make great deals of money, and highlighting the very few whose dishonesty makes headlines. It should be obvious to the thinking reader, that if fraud and corruption were common among the country's business leaders, the nation would have had many more severe economic crises than we have seen. In actual fact, most CEOs work hard, are notably honest in terms of their job performance, and demonstrate a serious desire to see the employees of their company succeed. The attacks on CEOs, in essence, proves to be no more than envy, someone who does not make a lot of money resenting someone who does, even though there is no cause for that resentment. Millions of people who make ordinary incomes spend a lot of money to see rich athletes play professional sports, yet they do not complain that these athletes make so much more money than they do. They pay outrageous prices for tickets to see celebrities in concert and shows, and do not whine about those celebrities making huge amounts of money for what they do. Is it really reasonable to make J.K. Rowling a billionaire, then complain because the CEO whose company provides safe and nutritious food to your kids makes a few million? Is it reasonable to call A-Rod a great guy just for playing baseball, but despise the CEO of the company which improves automobiles for greater safety and comfort as greedy, especially when the guy actually making something which improves your life makes less money than the jock whose actions do nothing to improve your life? Don't misunderstand, I do not resent authors or athletes or even celebrities, but if it's OK for them to make millions, then morally it's more OK for people who lead companies which keep us healthy and happy with their products to be rewarded by their directors. It is, to say it plainly, a futile and Socialist ideal to blame CEOs simply because they happen to succeed in their pay.

The complaint about job security might at first seem more reasonable; what could be more reasonable than to expect your employer to respect and protect your job as well as you do your company? The reality, however, is that you have the right to quit your job at any time and take a better position, and the company has that same opportunity. The way you keep your job, is to convince your employer that it hurts them to let you leave, and it is to their advantage to keep you happy. If you are doing your job in such a way that you look replaceable, it seems to me that you have the problem, not the employer. I'm not saying that all employers are wise or reasonable, but given the unemployment rate basically since Carter was President, a competent person should be able to find work. To bring up job security in an era where Unemployment has consistently tracked below 5% nationally, seems to me to do no better than play on fear.

Envy and fear; that is the essence of Dr. Reich's opinion on Capitalism. He seems honestly unable to recognize the ideals and ethics by which the overwhelming majority of American businesses operate, or even to understand that all corporations, every one, are made up by their employees and leaders, real people with real visions and the determination to succeed through hard work, inspiration, and optimistic courage. As for his statement regarding a "border" between Capitalism and Democracy, it shows to me yet another obstacle in Reich's mind, that he believes the two concepts should be rivals or even opponents. At least Reich, however unconsciously, admits a connection between Democracy and Capitalism; the more pervasive a form of Socialism is practiced, the less it has to do with Democracy at all, as evidenced by the unhappy histories of the Iron Curtain countries.

So what does this have to do with the campaign of Hillary Rodham Clinton? Perhaps these quotes from the Lady Senator will illuminate her present economic theories:

"We're going to take things away from you on behalf of the common good." (06/29/04)

"(We) can't just let business go on as usual, and that means something has to be taken away from some people." (06/04/07)

"We have to build a political consensus and that requires people to give up a little bit of their own turf in order to create this common ground" (06/04/07)

"I certainly think the free-market has failed" (06/04/07)

Robert Reich is not just an old party hack from the days of Bubba, but a valid barometer for the Clinton style of policy. And another Clinton Administration would simply be poison for America and her citizens.


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Comments (17)

Shouldn't we be comparing C... (Below threshold)

Shouldn't we be comparing CEOs of Fortune 500 companies against Pro Athletes? I mean, becoming the CEO of IBM / Ford or so on is a hell of a lot harder than making it to the NFL / MLB / NBA, no? And the CEO compensation of IBM compared to Peyton Manning (who can be fired any time his performance suffer or is injured...absolutely no job security there...) is really not that good. Granted, his career can last longer, but still his earning power is not 3.7x Manning / Brady / Jordan / Pujols...

Reich just labeled himself ... (Below threshold)

Reich just labeled himself a demagogue.

In the spirit of critical t... (Below threshold)

In the spirit of critical thinking, I offer the following thought provoking question:

If a CEO gets paid more than 'average workers', and one can presume that the complaint about CEO pay come from 'average workers', then why don't 'average workers' apply for the position of CEO?

The question is not intended to be facetious, but solely offered to prompt a line of reasoning along the line of a thought experiment.

> So where do Reich and ... (Below threshold)

> So where do Reich and a lot of other screaming meanies get the idea that CEOs are, in general, overpaid? It comes down to a very selective list; compensation for CEOs of the S&P's top 500 public corporations is around $10.2 million a year as of 2006, which does work out to around 260 times what the average worker makes.

(restating Kristian's good point)
A very selective list. How would that 260 to 1 ratio look if you compared the compensation of the top 500 CEOs with the top 500 salaried workers?

For someone supposedly an e... (Below threshold)

For someone supposedly an economist, Reich has long been among the least competent, most ideologue pretending to economic knowledge.

Amusingly, linking him to Hillary's future economic policy is probably unfair, because in the Clinton administration they did their best to keep him as far away from economic policy as possible. He has zero chance of influencing any future economic policy.

Either Reich believes in th... (Below threshold)

Either Reich believes in the market or he doesn't. How's that for thinking, porkopolis?

Before getting into a discu... (Below threshold)

Before getting into a discussion of CEO compensation, we need to remember how it is most often calculated nowadays, and why.

Recall that Democrats assailed the supposedly high salaries of CEOs some years ago, and passed provisions capping a company's ability to deduct their CEO's salary at $1 million per year. The idea was to force more of the CEO compensation into stock options, so that they would only gain beyond the statutory salary limit if the company's stock appreciated.

The result was that most CEOs and other high-ranking executives found themselves paid increasingly with stock options - even as the stock market experienced strong gains. They made out rather well, of course - in most cases, far better than they would have under the old system which relied primarily on guaranteed salaries. This wasn't what the Democrats wanted to see, but it's a bit late for them to complain about it.

Now, it is true that in some cases executives have adopted strategies which focused on stock prices in the short term rather than the company's long-term best interests. This was naturally inevitable once their means of compensation was shifted. In rare circumstances like Enron, for example, the zeal to show "better than estimated" earnings (which in turn causes stock prices to rise accordingly) caused some executives to cheat.

Fortunately, the laws governing publicly traded companies are such that these schemes are almost always exposed, and the perpetrators caught, fired, fined, and/or jailed as appropriate.

Nevertheless, the entire stock-price-based system of executive compensation which exists today and is resulting in record levels of executive pay was virtually mandated from Washington, DC - as the "solution" to high CEO salaries.

It all comes under the category of "Be careful what you ask for," it seems to me.

What is CEO pay as compared... (Below threshold)
Mikey NTH:

What is CEO pay as compared to the size of the corporation, in either number of employees or the value of the corporation? That would be a good comparison, I think. And privately owned corporations can be separated from publicly held corporations, for comparison purposes.

I often hear of Hollywood l... (Below threshold)
Chris G:

I often hear of Hollywood liberals like Penn, Mahar, and Robbins assail "corporate greed" and CEO/Corporate Executive pay as something evil. But I have always considered it ironic that many actors make salaries of several million dollars to make bad or mediocre films, that usually short-change the hapless investors who invest in the studio. The actor is often only responsible to know their script lines, and nothing else. Many are spiffed with all kinds of gifts and accomodations on the movie set. They may have to do some promo work for the upcoming movie, but the studio usually pays all of the expenses and charters a jet to get them around the globe.

On the other hand, the average CEO is not only accountable to the board of directors, they are also accountable to the company personnel to some degree. They may work 70-80 hours a week, and often only recieve bonuses if the company meets a certain metric. True, many get stock options, but there may be limitiations on vesting and when the stocks can be cashed out. For many companies, the significance of the stock price in the metirc is minimized to prevent short term manipulation of the company's financials.

CEO's are paid well, but what they invest of themselves in energy and experience more than justifies the compensation.

I also rememeber Reich on O... (Below threshold)
Chris G:

I also rememeber Reich on O'Reilly complaining about the Bush tax cuts and how the rich was getting over. He stuck to the meme that the tax cuts were bad, even as O'Reilly pointed to the record tax revenues the government was receiving as a result of the tax cuts.

No economy has ever prospered as a result of Socialist financial practices. Even democratic countries like Germany and France, that utilize Socialist economic practices are experiencing a severe lag in their eeconomic power.

There are many who love to ... (Below threshold)
Roger K:

There are many who love to hear that Hillary will take from the wealthy and give to the common person. This seems to be attractive during any economic hard times. Everyone in this country has the opportunity to achieve. Hillary wants to make it sound like working hard and being successful is a crime. I really doubt that a government program that is taking money from those who normally spend it in the economy and from those who support many secondary and tertiary businesses will be more effective at stimulating growth. Look at the chaos in the state of Michigan under Granholm who has socialistic ideals. Pfizer, Farmer Jack, Leer, Comerica, CompUSA, and volkswagon have either partially or entirely left the state. I fear that Hillary would cause the same problems on a national level.

did,nt we have fourth reich... (Below threshold)
spurwing plover:

did,nt we have fourth reich under co- president BILL CLINTON?

Many wealthy Americans don'... (Below threshold)
Paul F., Alexandria, VA:

Many wealthy Americans don't mind paying their fair share of taxes, since they understand that they benefited from all those who helped create the nation that they became successful in.

Hillary's comments are not put in context and I'm guessing that was done purposely since there is an obvious bias against her by this blogger.

Still, Hillary clearly believes that those who have done the best in America should not be allowed to use campaign dollars to get special tax breaks, as they have done with the GOP. Moreover, those earning millions can afford to pay a higher tax rate than those working an hourly wage.

It is sadly ironic that many Americans who will never earn more than $50,000 per year are willing to vote to defend the right of millionaires to keep even more of their money because they are afraid of any policies labeled socialistic.

The truth is that public education is socialistic and made America the greatest nation on earth in the latter half of the 20th Century.

Hillary is no socialist. She grew up a Republican after all. Taking quotes out of context prove nothing. The reality is that she would be a compassionate capitalist and it would be quite a step up from our current president a an insensitive incompetent who only knows how to do one thing right, kiss corporate ass!

I'm no fan of Hillary Clint... (Below threshold)

I'm no fan of Hillary Clinton, but the Bill Clinton years were at least marked by a strong and booming economy. In fact, even the Monica Lewinsky matter was somewhat forgiven by many Americans due to the strong economy.

The Clintons may be pockmarked with huge ethical shortcomings and challenges, but much like Richard Nixon, they are still highly capable. The American public will ultimately decide whether someone with serious ethical shortcomings like Hillary Clinton, who can probably do a great job as president is worth all the hassles. The alternative is electing someone like a Bush who is in way over his head, and who is seen as a great president by almost no one.

CEO pay, especially at the ... (Below threshold)

CEO pay, especially at the largest public companies, is not determined by merit. Often there is a cozy relationship between the board members who determine pay and the CEO. They all benefit from large salaries and perks. This also explains why CEO's of companies that have tanked still receive millions of dollars in salary, bonuses, and stock. There was a time when CEO pay was roughly 3x that of top paid workers, which seems like a much more reasonable ratio. If you want to defend these salaries, do it honestly, not by implying that free market forces are at work.

It does take a whole villag... (Below threshold)

It does take a whole village to rear a child, but not a village the size of the Federal Government. She is hardly a compassionate capitalist, she is a big government socialist. Didn't you hear her about taking your money for your own good?

Just think...a micro-second... (Below threshold)

Just think...a micro-second of decision followed by 5 seconds worth of spluge on a pig's garment will be enough to keep that dopey twat out of the WH.






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