Wednesday, February 04, 2009

Coattail Spending

Many years ago when I was in management, I wanted to purchase a new set of plasma torches for one of the machines in my plant. Don’t worry what those are, it doesn’t matter to this post, but they cost about $20k and upper management rejected my request. No matter how well I justified it in repeated requests with legitimate claims of reduction in our long backlog, lower maintenance, better quality, fewer man-hours and the like; nada.

Then came the day that our backlog justified the purchase of an additional machine and upper management asked me to write up a proposal for one. The proposal included both capital spending and expensed items, and as one of the expensed items, I included the purchase of a new set of plasma torches for the existing machine. I did not lie about it or hide it, and I used all of the same justifications I had used earlier. The new machine was approved, and so were the new plasma torches for the existing one.

As a separate item that $20k purchase seemed unacceptably expensive to our upper management, but riding on the coattails of a $650k purchase they approved it without batting an eye.

That’s how Congress spends our tax money, but it does so in far larger numbers, and a great many more dollars “ride on the coattails” than are actually “in the coat.”

I’m not talking about earmarks, here, which are a tiny amount and don’t really matter in the overall cash cow that is our national budget. I’m talking about “amendments,” “riders” and “collateral items” that clutter up every spending bill that passes through Congress.

Right now, for instance, we are discussing a huge “stimulus bill” to get the economy restarted, and it is a hugely complicated bill that is being rushed through the process at a frighteningly frenetic pace. (The last one that was this hastily passed was TARP, and we all know how well that worked out.) The overt purpose of this bill is not even very clearly defined; it is to create jobs, or it is to get banks to start lending, or it is to “restart the economy” in some fashion akin to magic.

I’m not opposed to this bill in principle. I concur with people like Paul Krugman who say that we need to do something and that what we do needs to be big. But I would suggest that now is not the time to be putting a lot of stuff on the coattails of what we do for economic purposes.

The stimulus bill contains, for instance, funding to computerize medical records on a national basis, which without doubt is a worthwhile thing to do. But in what way is that simulative to the economy? It may put a few programmers to work, but not all that many since the Mayo Clinic and the Veterans’ Administration Medical Service already have software which is more than adequate to the task. It will require a lot of computers, but computers are made overseas, and I’m not in favor of stimulating the economy of South Korea with this bill, I’d rather stimulate the economy of the United States.

President Obama proudly says that the bill contains no earmarks, and admittedly this is not an earmark. It is also not directly pursuant to the central purpose of the bill; it is nothing more nor less than coattail spending.

As soon as we see one item like this in a spending bill, one item unrelated to the purpose of the bill, one item that is some Congressperson’s pet social project being taken along for the ride, we have to wonder how many more such items are buried in this bill. How much of our tax money is being spent for the central purpose, and how much is being spent on a social agenda unrelated to the nominal purpose of this bill?

While I do not oppose this bill, I am utterly disgusted with the way the Congress and the President are handling it. President Obama promised to change the way things are done in our government, but the very first big issue on which he is leading the way he leads with the same old coattail spending and the same old double talk. He brags about the bill not having earmarks and fails to admit that it does have large amounts of unrelated spending. Asked about how much of the bill is actually simulative, he avoids answering directly and talks about “hoping” that large parts of it will be. He claims that “the parts that people are complaining about” amount to only one percent, but has no answer for why that one percent is in the bill.

And don't even get me started on the executive salary limits thing. (Okay, I am started.) This is demagoguery and grandstanding of the worst sort. Executive compensation is a drop in the bucket to the trillions of dollars that flow through our economic engine, and the money paid to management contributed essentially nothing to the collapse of our economy. Sure, the managers making a lot of money was a source of anger to the people who lost money, but as a cause of the economic collapse… What a joke.

Politicians, President Obama among them, have jumped on this bandwagon because it is an emotional appeal to the voters who lost out on the feeding frenzy that was the economic debacle, and they are milking it for every drop of anger that exists in the electorate. If you think that setting limits on executive compensation is in any way, shape or form contributing one iota to economic recovery then I want to talk to you about a good deal on a bridge in Brooklyn.

Change? This is the same old stuff, being fed to us the same old way.

Update: Wednesday, 8:45am
Don't get me wrong, I have nothing against limiting executive salaries; limit them all you want. Just don't try to convince me that doing so is any part of the solution.

Part two: everyone seems to be blaming Republicans for the resistance to this bill. I am not functionally a Republican. Democrats put as much coattail crap in this bill as Republicans did. The problem, here, is Congress and Obama's willingness to go along with them.

1 comment:

Anonymous said...

My My My... where to start? I think a reasonable executive would have approved your original request if properly documented and supported. The only reason not, if the budget truly did not allow it.

Problems with the TARP was the banks didn't use it the way they were "supposed" to.. which means that Paulson et al were not good judges of the situation, ie thinking through the various scenarios, playing devils advocate, what is Plan B, etc.

I have problems with this new "stimulus" bill because of the unknowns (will it work?) and the regular spending part (non-stimulus).

Computerizing medical records will allegedly help the health care agenda by reducing manpower and overhead costs, but that's not a "stimulus" deal - that a different agenda. ANd it woudl take a lot more than what being asked for here. It would help american installation contractors and programmers, but not PC manufacturers.

I noticed a lot of the bill included social assistance (which is probably necessary to help people & states through the effects of the recession), but this is hardly "stimulative".

The automakers 'bailout' will in effect, simply keep them in business for a few more months, but I seriously doubt it will do anything to help them restructure. I just read last night about a tax break for car buyers. I'm notr sure how much this will help, especially since a lot of the taxes and fees are paid to the states (and local cities). They would like to see sales, of course.

So much of this, as well as the original TARP is being thrown out there as a "solution" to a "crisis" with "emergency" action needed, etc etc. Maybe they are trying to get this to pass without close inspection and debate.

The way this money (OUR money) is being bandied about needs serious debate. We elected these people to be caretakers of the country.

Executive compensation is agreeably a drop in the bucket compared to the rest of it. I don't know that it is our/legislators purview to do that, is it justifiably the shareholders duty. And it's agreeably not part of the economic solution. Having said that, I think that "bonuses" given automatically is not a "bonus for performance", but part of regular compensation. And a "bonus" should be directly tied to performance - if the company tanks, why in God's name should you be getting a bonus?

Oh and while we're on that subject, what about the highly paid, lavishly perked legislators? (especially the useless ones in Sacramento). Don't get me started on them.

Yes, the politicians are grandstanding and postureing and so on ad nauseum. And it certainly looks like more of the same. Ok, I'm not holding my breath for change of that sort, and yes, you have a ways to go. Still too early to tell much of anything, and I'm certainly willing to give you that chance. Please pay attention, President Obama (and Congress). We the people can effect change too, like voting you out of office.

As far as Dems and Rubs are concerned, a politician is a politician. They all have a hand in it, good and bad.

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