The Camel In The Tent

By Donald J. Boudreaux Wednesday, February 11, 2009

About the writer

Donald J. Boudreaux is chairman of the Department of Economics at George Mason University in Fairfax, Va. His column runs twice monthly. He can be reached via e-mail.

The Obama administration announced that no executive salary at any firm that accepts federal bailout funds can exceed $500,000 annually. To many people, this idea seems sound. To me, it seems sadly suggestive of a bleak future for America.

Before we discuss the problems with this salary cap -- the object of my next column -- it's useful to point out some general noxious aspects of the goings-on inside the Beltway that make this salary cap acceptable to many Americans.

First, and most obviously, firms that accept bailout funds from Uncle Sam have little cause to complain about whatever restrictions he slaps on them. He who pays the piper calls the tune. And although Uncle Sam is not really the piper's payer -- taxpayers are -- the decision to pay or not to pay in this case is Uncle Sam's. It's inevitable that he will demand that the piper play only tunes that set toes on Pennsylvania Avenue tapping.

Any business executive surprised by such restrictions should be demoted to the rank of bicycle messenger.

But the most egregious problem with this salary cap, as with all other restrictions and requirements that are attached to bailout funds, is that it sets a frightening precedent. Government is now increasingly in the business of determining salaries and deciding whether firms can have private jets. These matters -- salaries and jets -- are lightning rods for public attention. So they are, ipso facto, lightning rods for politicians' attention.

You can bet your grandchildren's share of the national debt, however, that other corporate matters will become lightning rods of attention -- and, hence, objects of self-righteously imposed government restrictions.

Is Bank of America spending oodles of money on advertising? Horrors! Make it stop. Is General Motors planning to install machinery that will displace some workers? Never! Make it stop. Is Chrysler appointing yet another middle-aged straight white male as its president? Racist homophobic chauvinists! Make them appoint a handicapped lesbian of color.

Whatever the political fear or fad du jour, be sure that it will be revealed in gaudy orders given by Washington to whatever firms feasted on its bailout bounty.

Which raises the question: Which are the firms that feasted on Washington's bailout bounty? This question is not as easy to answer as you might think. Sure, it's clear that, say, Chrysler got bailout funds. But what about Chrysler's suppliers that, while none received any direct handout of taxpayer funds, enjoyed higher profits as a result of Chrysler remaining in operation?

Indeed, what about every firm in America? After all, the financial and auto-producer bailouts, and the more general "stimulus" packages, are meant to assist the entire economy. Funds spent on the bailouts and on the stimuli eventually wend their way throughout the whole economy, benefiting everyone. That's government's stated goal.

Because (the presumption is) without these bailouts and stimuli the U.S. economy would have collapsed into ruins, it stands to reason that every firm -- every American, even -- received government largess. And because this largess was bestowed, either directly or indirectly, upon every firm, no firm deserves to be excused from having to follow detailed marching orders from Washington.

I hope I'm wrong. But I genuinely fear that the extensive and massive "economic rescue" spending pouring today from Washington will combine with the newfound enthusiasm for hyperactive government to quickly create a culture of government direction of the economy as this country has never before known.

The camel's nose is under the tent. It will be followed shortly by his filthy rear. When that happens, the entire tent that is the American economy will be not only foul, but so crowded with a stupid and clumsy animal that very few of us will have enough elbow room to pursue our own peaceful goals as we choose.

The camel will, of course, assure us that his hulking presence within the tent is necessary. He'll snort that if he were to leave the tent -- indeed, even if he were to remove from the tent merely one paw -- the tent itself would crash down in a heap, smothering all us good Americans.

As time passes with the camel fully in the tent, fewer and fewer Americans will remember how spacious and full of opportunities the tent was before the camel made himself at home within it.

And those of us who continue to demand that the camel leave will be increasingly viewed as utopian dreamers -- delirious fools who actually believe that the tent can remain standing without the camel parked inside and leaving us ordinary folks scant private space.

Addendum From Rich Grassel

Make no mistake... CEO's who abused their responsibilities with their pursuit of unmitigated greed; and who danced lightly away to some exotic Caribbean Island with other people's millions, deserve nothing less than life in prison. For people like Bernie Madoff, I am tempted to think that prison is too good for them... Their maleficence has and will continue to cause much in the way of suffering and angst. In addition, they have enabled those who privilege "socialism" to take the high ground, at least temporarily, in the discussion about the role of Government, Social Issues and the Free Market.

However, the latter two thirds of Mr. Boudreaux's article genuinely terrifies me... Particularly, to expand this thought even more, do we really want government intrusion into the private business sphere when it comes to religious activity and expression? Will those businesses that received Federal bailout monies now be subjected to Federal Government policies that involve Lunch-Time Prayer meetings and Bible Studies? Will employee's be able to decorate their offices and work areas with a Nativity Scene at Christmas; have a open Bible on their desk, or have A Crucifix on the wall? How are those things, for example regarded in most public schools or government offices? Broadly speaking, the precedent for this has already been set by the Grove City Court case in 1983 and Title IX. Followed by the Discrimination Restoration Act passed by Congress in 1987. Bottom line, those entities that receive Federal Dollars and public funds are subject and expected to abide by all Federal Mandates. Do we really want this?