Big Government Will Set Your Salary?

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One of the nice things about the Internet is that you no longer need to rely on a journalist's description of a bill: You can dig up the bill and read it yourself! (If you can handle the excitement, of course.) And in the case of Byron York's piece in the today's Examiner -- "Beyond AIG: A bill to let Big Government set your salary" -- it's worth going back to the primary sources.

York's piece and the bill in question have gotten a lot of attention. Michelle Malkin worries that compensation restrictions might be coming to "all US companies, not just TARP recipients." Little Green Footballs frets that the new bill will "allow the government to determine how much all employees of businesses that accept federal money should be paid." (The post's headline: "A Bill to Let Big Government Set Your Salary.") And NewsBusters carps that the bill would give Tim Geithner "veto power over salaries at every company into which the government has inserted its intrusive claws." (Headline: "Congressional Committee Passes Bill Controlling ALL Pay at US-Involved Companies.")

I am willing to bet that none of these people has read the bill, because all of their descriptions are wrong.


I'm not a fan of the bill in question -- I've expressed my distaste for compensation restrictions here, here, here and elsewhere -- but let's set the record straight. All of the descriptions above make it sound like the bill in question will effect a greater number of companies than the House's original tax bill -- or, in York's words, it will affect all "companies that have received a capital investment from the U.S. government." And all the headlines dial up the fear by making it sound like the government is gunning for your money.

Except it isn't -- unless you work for one of the very small percentage of American companies that have received TARP funds. The bill makes clear that the restrictions apply only to recipients of a capital investment under the Emergency Economic Stabilization Act of 2008 (which established TARP) or the Housing and Economic Recovery Act of 2008 (which shored up Fannie and Freddie). The bill does not apply to every company that receives money from the federal government. And it certainly doesn't apply to every company in America.

Actually, it doesn't even apply to every company that receives money through TARP. It applies to companies in which the government has made a "capital investment" through TARP. What does that mean? It means only those companies in which the government has an ownership stake. That's not my wacky liberal interpretation; I called the office of the congressman who wrote the bill to find out. Here's Todd Jurkowski, press secretary to Democrat Alan Grayson, who wrote the bill:

This bill applies only to companies in which the government know has an ownership stake. This is not an effort to regulate every single company in the country.

There you have it. I look forward to corrections and amplifications from Malkin et al soon.

That said, there are things I don't like about the new bill. First, it's retrospective, and I think retrospective laws should be discouraged.

More importantly, the bill is incredibly vague. It restricts compensation based on two standards: payments can't be "unreasonable or excessive," and they can't be "not directly based on performance-based measures." What counts as "unreasonable or excessive" is up to the Treasury Secretary, who has 30 days after the bill is passed to create a standard. What counts as "performance-based" is determined by four loose standards that seem to be crying out for a healthy round of litigation.

But don't take my word for it: Read the bill (it's below). So many others have not..


hr_1664.pdf 

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Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism. He was previously a fellow at The Atlantic and an editor at The Guardian. More

Conor Clarke is the editor, with Michael Kinsley, of Creative Capitalism, an economics blog that was recently published in book form by Simon and Schuster. He was previously a fellow at The Atlantic and an editor at The Guardian. He is also on Twitter.
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